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Cisco (CSCO) Announces Updates Regarding Pending Acacia Takeover

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Zacks Equity Research
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Cisco CSCO recently announced that it has sought confirmation from Delaware Court of Chancery that it has fulfilled all required conditions to close the acquisition of earlier announced Acacia Communications ACIA. This includes obtaining approval for progressing with the acquisition from China's regulatory authority — State Administration for Market Regulation (SAMR) on Jan 7, 2021.

The networking giant also announced that it is working to get a court order to bar Acacia from cancelling the proposed takeover until the matter is settled by court.

On Jan 8, Acacia announced its decision to end the merger with Cisco with immediate effect. In a press release, the company cited that SAMR’s approval for closing the deal was not received within the timeframe as noted in the merger agreement. Hence, Acacia exerted its right to cancel the transaction.

Acacia also had added that Cisco notified that it might seek legal options to contest the termination of the merger. The company further added that it will provide more updates on recent developments and preliminary results for the fourth quarter ended on Dec 31, 2020 at the investors’ conference call scheduled for Jan 11.

Cisco Systems, Inc. Price and Consensus

 

Cisco Systems, Inc. Price and Consensus
Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

 

In July 2019, Cisco announced its intent to purchase Acacia for $2.6 billion  net of cash and marketable securities.

Acacia is an optical networking technology company that is engaged in design, development, manufacturing and marketing of communication equipment. Its footprint is spread across Americas, Asia Pacific, Europe, Middle East, and Africa. It provides coherent optical interconnect products mostly for content and communication service providers as well as cloud infrastructure operators.

Why is Cisco Pursuing Acacia Merger?

Cisco is pursuing the merger as it is looking for legal options to thwart Acacia from cancelling the takeover.

With Acacia buyout, the company aims to expand optical systems portfolio to support higher bandwidth. The increasing need for optics to address emerging network infrastructure demands of power and density deserves a special mention.

Back in 2019, Cisco had highlighted that the Acacia buyout will strengthen its routing, switching and optical networking solutions amid proliferation of optical interconnect technologies.

The integration of Acacia’s optical technology with Cisco’s network and cloud security platforms is likely to enhance Cisco’s reach in the coherent technology and pluggable solutions’ market.

Acacia was supposed to join Cisco’ Optical Systems and Optics business, a unit of the company’s networking and security division post the conclusion of the acquisition.

Currently, Cisco carries a Zacks Rank #3 (Hold). Shares of Cisco are down 6.1% compared with industry’s decline of 5.7% in the past year. In comparison, the S&P 500 has gained of 18.3% over the same time frame.

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Some better-ranked stocks in the broader sector are NetApp NTAP, and Micron Technology MU. Both the stocks flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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