Cisco, Acacia Communications renegotiate merger at higher price

Cisco (NASDAQ:CSCO) and Acacia Communications (NASDAQ:ACIA) appear to have put aside their different opinions on the viability of their previous merger agreement to forge a new one – that increases what Cisco will pay for the developer of optical transceivers and coherent DSPs by almost 65%. The two companies announced today that Cisco will now pay $115 per share in cash, or approximately $4.5 billion on a fully diluted basis, net of cash and marketable securities, for Acacia. The companies expect the deal to close by the end of this quarter, subject to closing conditions that include approval from Acacia’s stockholders.

Cisco originally had agreed in July 2019 to pay $70 per share, or approximately $2.6 billion (see “Cisco to buy Acacia Communications for optical transceiver, components play”). However, the deal appeared to founder when China’s State Administration for Market Regulation (SAMR) delayed granting approval, to the point that Acacia tried to cancel the merger last Friday. Cisco went to court to receive a temporary injunction, claiming that SAMR had finally approved the deal the day before (see “Cisco garners temporary restraining order against Acacia Communications”). Acacia filed counterclaims on Monday, setting up a potentially ugly court fight (see “Acacia Communications fights Cisco claim with counterclaim in court”).

In court last Friday, an attorney for Cisco stated Acacia was trying to get out of the agreement because it believed its valuation had climbed significantly since mid-2019. If that was the case, Acacia appears to have won that argument. Acacia has not commented on whether its opinion has changed regarding whether SAMR indeed has approved the deal, but President and CEO Raj Shanmugaraj quickly resumed his former praise for the combination.

"We maintain our strong conviction in the strategic benefits of joining the Cisco family and believe it will enable us to better support our existing customers, while reaching an expanded footprint of new customers globally," said Shanmugaraj, who will join Cisco as a result of the transaction. "We are pleased to have reached this agreement with Cisco and are excited to move forward with the combination which we believe will transform the optical industry, while providing great opportunities for Acacia employees to continue their innovation."

"Both Cisco and Acacia have been focused on helping customers create a simpler operations environment, with a shared vision for the future of routing and switching with pluggable optics," said Bill Gartner, senior vice president and general manager, Cisco Optical Systems and Optics Group. "Together we will ignite our strategy to transform the optical world as we know it, with innovative solutions to boost network capacity inside and outside the data center."

Cisco had previously stated that it intended to let Acacia continue to serve the merchant market for optical modules and coherent DSPs. That still appears to be the case, as Acacia has reposted to its homepage a “letter to customers” from Cisco originally issued shortly after the first agreement was signed that states that position (see “Cisco, Acacia Communications assure customers”).

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