Cisco and Acacia move forward on merger but price tag goes up to $4.5B

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Cisco and Acacia settle their differences on their merger, but the price goes from $2.6 billion to $4.5 billion. (Pixabay)

After claims and counter claims in court, Cisco and Acacia Communications announced on Thursday that they have settled their differences and are moving forward on their merger, but it comes with a heftier price tag.

Dating back to 2019, Cisco had a $2.6 billion deal in place to buy coherent optics company Acacia, but after Acacia attempted to scuttle that deal last week—by saying Cisco didn't get regulatory approval from China by the deadline—Cisco is now paying $4.5 billion. Cisco is paying $115 per share in cash, on a fully diluted basis, net of cash and marketable securities.

Cisco and Acacia expect the new deal to close in the first calendar quarter of this year, subject to the usual closing conditions and sign-off by Acacia's shareholders. Once the deal is closed, Acacia CEO Raj Shanmugaraj and his employees will join Cisco's optics business.

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In the end, both companies appear to have gotten what they wanted. Cisco now has Acacia back in the fold for its "Internet for the Future" portfolio, which includes its own solutions across silicon, optics and software. With its deep expertise in coherent optics, Acacia will be a foundational pillar in Cisco's core networking strategy. For its part, Acacia was able to convince Cisco that it's a much more valuable company than it was when the deal was first struck.

"I am delighted that Cisco and Acacia have decided to come together in this mutual deal," said Cisco CEO Chuck Robbins, in a statement. "We look forward to welcoming Raj and the Acacia team to Cisco to offer our customers world-class coherent optical solutions to power the Internet for the future."

While Cisco was a customer of Acacia's prior to both deals, Acacia's customer roster also includes ZTE, Infinera and Adva, among others. While some of those companies compete with Cisco, Cisco said in Thursday's press release that it would continue supporting Acacia's existing customer base.

The scuffle between Cisco and Acacia started on Friday when Acacia announced it was terminating the deal with Cisco after saying the merger failed to garner regulatory approval in China in the required time-frame. Acacia said approval of the Chinese government’s State Administration for Market Regulation (SAMR) was not received by the Jan. 8 deadline.

Following on the heels Acacia's announcement, Cisco said on Friday that it was seeking confirmation from the Delaware Court of Chancery that it had met all conditions for the closing of its acquisition of Acacia Communications, including China.

After Acacia's announcement, Cisco sued Acacia in Delaware Chancery Court. After a hearing, Chancellor J. Travis Laster granted Cisco's request for a restraining order and to expedite the proceedings, according to a story by Bloomberg.

RELATED: Judge grants temporary court order to block Acacia from ending $2.6B deal with Cisco

Cisco put out a press release after Acacia's that said it was notified by SAMR on Thursday that the agency had determined that its submission was "sufficient to address the relevant competition concerns." Sunday night Cisco CEO Chuck Robbins took to Twitter to thank SAMR for approving the deal.

RELATED: Acacia strikes back; files counterclaim against Cisco

Acacia announced on Monday that it had filed its answer and "affirmative defenses" in response to the complaint filed Friday by Cisco in the Delaware Court of Chancery. At the same time, Acacia also filed a counterclaim against Cisco that seeks a "declaration that it validly terminated the merger agreement with Cisco because the required Chinese regulatory approval was not obtained and the merger did not close before the agreed-upon termination date under the agreement."

"Acacia believes that a January 7, 2021 email from a SAMR employee stating Cisco’s submission was 'sufficient to address the relevant competition concerns' does not constitute regulatory approval, as Cisco claims," Acacia said in Monday's press release.