Cisco Spars With Acacia Communications Over Takeover Deal -- 3rd Update
January 08 2021 - 6:12PM
Dow Jones News
By Dave Sebastian
Acacia Communications Inc. is scrapping a plan to sell itself to
Cisco Systems Inc. for roughly $2.6 billion, though the
networking-equipment giant is aiming to muscle its way to
completing the deal.
Cisco agreed to buy Acacia, a maker of optical interconnect
technologies such as modules and semiconductors, in July 2019 for
$70 a share in cash. The San Jose, Calif., company said Acacia's
technology would enable users of its hardware such as data-center
operators and telecom-service providers to drive more data over
high-speed internet networks.
On Friday, Acacia said the deal hadn't received the Chinese
government's approval of the combination within the prescribed time
frame, a claim Cisco disputes. Acacia, based in Maynard, Mass.,
said that it has the right to walk away from the transaction and
that it wouldn't be eligible for a $120 million deal-termination
payment from Cisco.
Cisco, meanwhile, said the purchase has received approval in
China, noting that its submission to regulators was "sufficient to
address the relevant competition concerns." The company said it is
seeking Delaware Chancery Court confirmation that it met all
conditions for the combination and for a court to order Acacia to
close the deal.
Acacia might be looking to renegotiate the deal on better terms,
said Raymond James analysts in a research note Friday. The analysts
noted that Marvell Technology Group Ltd.'s deal for semiconductor
maker Inphi Corp., which was announced in October, is priced at
12.5 times what analysts expect for 2021 sales. Cisco's deal for
Acacia is valued at 5.5 times 2021 sales expectations.
Acacia shares rose 9.9% to $79.60 in Friday trading, while Cisco
shares were up 0.2% to $45.06. Acacia derived 15% of its revenue
for the first nine months of 2020 from Cisco, the company has said
in securities filings.
Cisco was among companies expected to face scrutiny from Chinese
government agencies as part of a potential blacklist used to punish
U.S. technology companies in response to Washington's restrictions
on telecom giant Huawei Technologies Co., The Wall Street Journal
reported in September.
The company, which competes with Huawei, already has lost
contracts to supply some of its long-term Chinese customers, such
as China's large state-owned telecom carriers.
Smartphone chip maker Qualcomm Inc. scrapped a planned $44
billion acquisition of Dutch chip maker NXP Semiconductors NV in
2018 after a deadline to gain approval from Chinese regulators
passed. Other big tech deals are up for regulatory scrutiny there,
including Nvidia Corp.'s plan to buy chip-design company Arm from
SoftBank Group Corp. British antitrust regulators this week said
they were reviewing the proposed acquisition.
Cisco has gobbled up companies in the optics space such as
Lightwire Inc., CoreOptics Inc. and Luxtera Inc. in recent
years.
The Acacia acquisition would have been Cisco's biggest since
2017.
Cisco's business has been hampered as companies cut back on
purchases of networking equipment during the Covid-19 pandemic. For
the quarter ended Oct. 24, Cisco's revenue fell 9% from a year
earlier, while its profit declined 26%.
Meanwhile, Acacia posted a 61% increase in profit for the
quarter ended September on a 32% rise in revenue, driven by sales
of embedded modules.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
January 08, 2021 17:57 ET (22:57 GMT)
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