It looks like Cisco’s purchase of Acacia is finally going to happen. Following the announcement of an amendment to the definitive merger agreement and approval from the Chinese regulator, it seems the end is in sight.
Under the terms of the amended agreement, Cisco will acquire Acacia for US$115 per share in cash, or approximately US$4.5 billion on a fully diluted basis, net of cash and marketable securities. Cisco and Acacia expect to complete the acquisition by the end of the first calendar quarter of 2021, subject to closing conditions, including Acacia stockholder approval. Upon completion of the acquisition, CEO Raj Shanmugaraj and Acacia employees will join Cisco’s Optics business.
“I am delighted that Cisco and Acacia have decided to come together in this mutual deal,” said Chuck Robbins, chairman and CEO, Cisco. “We look forward to welcoming Raj and the Acacia team to Cisco to offer our customers world-class coherent optical solutions to power the Internet for the future.”
The road to the agreement, first announced back in July 2019, has not been smooth however. Under the terms of the original agreement, Cisco agreed to pay US$2.6 billion on a fully diluted basis, amounting to US$70 per share in cash, with the agreement subject to the usual conditions, including approval from the State Administration for Market Regulation of the People’s Republic of China (SAMR).
By July 2020, Cisco said that although the deal still hadn’t received approval for the purchase from SAMR, it was optimistic that the deal would close in 2H20. Such approval was not given however and in early January 2021, Acacia said it was pulling out of the deal on the grounds that SAMR approval had not been received by the deadline of January 8th. Cisco counterclaimed, saying it had received an email granting approval on 7th January, which Acacia dismissed as insufficient, as it was only from a SAMR employee. Cisco however won a restraining order from the Delaware Chancery Court preventing Acacia from terminating the deal.
According to a report by Bloomberg, Cisco alleged that Acacia was attempting to pull out because it believed its shares were now worth more than the US$70 Cisco offered in the original agreement. Indeed, it was estimated in January 2021 that Acacia’s shares could now be worth upwards of US$110.
In mid-January 2021, both companies announced they had agreed to a new deal under the terms of which Cisco agreed to raise its offer by around 65%, meaning that Acacia had won the argument but Cisco was probably correct in assuming the real reason behind the threatened pull-out. Lo and behold, just a couple of days after the new agreement was announced, SAMR gave the go-ahead.
Comment: M&A’s are never simple affairs, but this one seems particularly fraught. The lesson is, if you’re going for a buyout, get it done quickly.
For more information, visit www.cisco.com