Takeover Rumors Lift PairGain Stock
PairGain Technologies Inc. shares surged nearly 66% Monday in heavy trading amid renewed speculation that the Tustin-based maker of telecommunications equipment is a takeover target.
PairGain’s stock climbed $5.41 a share to $13.63 in trading of 20.7 million shares, making the stock the third most active in U.S. markets.
Such rumors have cropped up before, particularly with analysts generally agreeing that the company’s stock is undervalued.
“We’ve heard these same rumors when our stock price was high and when our stock price was low,†said Charles McBrayer, chief financial officer for PairGain. “To think that there would be takeover rumors when our stock price is low is certainly not unexpected.â€
In June, PairGain’s stock leaped 16% in a single day of heavy trading after a New York analyst upgraded his rating, and cited the firm’s potential as a takeover target.
But the shares fell when the company denied the rumors and insisted it wasn’t considering potential merger options. At the time, however, PairGain Chief Executive Charles Strauch did say that the company wasn’t opposed to considering offers from the “right partner.â€
Monday’s stock spike is PairGain’s biggest-ever one-day increase, and the volume is the greatest since May 1997. Shares of Ciena Corp., another maker of phone equipment, rose $4.63 to $21.81. Ciena was the most active stock.
PairGain sells products that speed Internet hookups over standard copper wires--a technology known as digital subscriber line service.
Takeover talk has resurfaced in the industry, and PairGain is rumored to be a buyout candidate, said Michael Neiberg, an analyst at ING Baring Furman Selz LLC.
“PairGain is one of the names constantly being thought about as a takeover candidate,†said Neiberg, who has a “buy†rating on the stock. Neiberg wouldn’t speculate on PairGain’s potential suitor.
Analyst Michael Perica said he’s heard the PairGain buyout rumors, but added, “I haven’t confirmed that the rumors are true.†Perica, who has an “accumulate†rating on PairGain, predicts the shares will reach $18 in the next 12 to 18 months.
Even with Monday’s rise, PairGain’s shares are down about 54% from their 52-week high of $30 in November 1997.
Taking advantage of its low share price, PairGain said last month that it plans to buy back 7 million shares, or about 10% of its shares outstanding.
Ciena, the biggest maker of equipment that boosts the capacity of phone lines, also is a takeover candidate, Neiberg said.
Tellabs Inc. scrapped its planned acquisition of Ciena in September. Shares of Ciena, which is based in Linthicum, Md., rose 11% Friday on speculation the company is poised to unveil a new contract.
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PairGain Makes Big Gain
PairGain Technologies Inc. gained 66% Monday to close at $13.63, up $5.41. The stock was one of the most heavily traded on all U.S. markets. Here’s how the stock has closed during the last six months:
(chart)
Monday close: $13.63
Monday’s Most Active
(millions of shares traded)
Ciena Corp.: 37.37
Citigroup Inc.: 23.41
PairGain Technologies: 20.73
Dell Computers: 20.43
Cisco Systems: 14.65
Source: Bloomberg News
