China Clears Cisco-Acacia Deal With Conditions

By Stephanie Yang

China's antitrust regulator approved Cisco Systems Inc.'s acquisition of Acacia Communications Inc. Tuesday, clearing the deal for completion under several conditions aimed to protect supply to the companies' Chinese customers.

The State Administration for Market Regulation said that the U.S. telecom-equipment companies and subsequent merged entity must fulfill existing contracts with Chinese clients and keep commercial terms unchanged. The conditions, stipulated in a statement on SAMR's website, also required that Cisco and Acacia continue supplying certain products without discrimination and unreasonable terms.

Tuesday's approval removed a regulatory barrier that had nearly unraveled the deal earlier this month. Acacia had moved to terminate the agreement, first announced in July 2019, claiming Cisco hadn't received timely approval from Chinese authorities. Cisco disputed the claim and raised the purchase price by 64%, cementing a new deal.

The need for Chinese regulatory approval has loomed large over some major tech deals as waiting times have increased and U.S.-China relations have soured.

In 2018, a $44 billion deal between Qualcomm Inc. and Dutch chip maker NXP Semiconductors N.V. fell through after it failed to gain approval from Chinese regulators before the deal expired. Applied Materials Inc. recently raised its offer for Kokusai Electric Corp. to $3.5 billion from $2.2 billion in June 2019 as the semiconductor equipment companies also await Chinese approval.

China's top market regulator said that it believes the deal could eliminate or restrict competition in China's optical transmission system industry, and that the conditions it named could reduce the expected negative impact on market competition. The restrictions will remain effective for five years, it said.

Cisco and Acacia didn't immediately respond to requests for comment.

Cisco will pay $115 a share to acquire Acacia, a 64% increase on the original price of $70 a share agreed to in July 2019. The deal values Acacia at about $4.5 billion on a fully diluted basis.

Acacia would be the latest in a string of companies in the optics space that the San Jose, Calif-based Cisco has acquired in recent years, including Lightwire Inc., CoreOptics Inc. and Luxtera Inc. Cisco said in 2019 that the acquisition would enable its users to drive more data over high-speed networks.

--Lekai Liu contributed to this article.

Write to Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

January 19, 2021 09:13 ET (14:13 GMT)

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