Cisco Lifts Acacia Bid From $2.5B to $4.5B to Clinch the Deal

Ian King (Bloomberg) -- Cisco Systems Inc. raised its offer for Acacia Communications Inc. by more than 70% to close a deal that its target tried to walk away from.

Acacia shareholders will get $115 a share in cash in the revised bid, for a total deal value of $4.5 billion, Cisco said in a statement Thursday. Acacia, which agreed to the revised proposal, rallied as much as 32% in New York trading Thursday. The companies aim to complete the deal by the end of the first quarter.

The new terms reflect the difficulties of trying to do transactions that require approval in China and the surge in public market value of technology stocks. Approval from the largest market for semiconductors and many other types of electronic equipment has become a more difficult and time-consuming process during the outgoing U.S. administration’s trade war against China.

Networking equipment maker Cisco announced in July 2019 that it had reached a deal to acquire Acacia, an optical component maker, for about $2.6 billion, saying the merger would help it capture a bigger chunk of spending on 5G telecommunications networks.

Last week Acacia said that it was terminating the agreement because Cisco didn’t receive Chinese regulatory approval within the time-frame of the merger agreement. Cisco disputed that saying that an email it got from China constituted approval and took legal action to enforce the terms of the deal.

Cisco’s move to renegotiate follows a similar tactic by Applied Materials Inc. which earlier this month said it raised its offer for KKR & Co.-owned Kokusai Electric Corp. by 59%, citing higher valuations in a growing industry. The deal also extended the target closing date to allow for regulatory approval from China, the final remaining jurisdiction where sign-off is needed.

Cisco shares were little changed at $45.35 in New York following the announcement. Acacia surged 32% to as much as $114.45.