Cisco clears final major hurdle in $4.5B deal to buy Acacia

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Cisco notches the final regulatory approval for its $4.5 billion deal to buy coherent optical vendor Acacia. (Pixabay)

In a deal that has been brewing since 2019, Cisco has garnered the final regulatory approval for its $4.5 billion deal to buy Acacia. Reuters reported Tuesday morning that the Chinese government’s State Administration for Market Regulation (SAMR) has approved the merger. Cisco had previously gained regulatory approval for the deal, which was first announced in 2019 with a price tag of $2.6 billion, from the United States, Germany and Austria.

SAMR became the final hurdle for Cisco to clear in order to get the deal done. In July, both companies issued a press release that said the merger was awaiting approval from SAMR, and that "Cisco and Acacia remain actively engaged with SAMR and expect the acquisition to receive regulatory clearance."

According to Reuters, SAMR said the deal could go forward as long as Cisco and Acacia continued to service existing contracts in China, as well as continue to supply companies in China “in accordance with the principles of fairness, reasonableness and non-discrimination”.

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.

"We believe that the acquisition of Acacia by Cisco will further enhance Cisco’s silicon and optics portfolios, and will help accelerate the trend toward coherent technology and pluggable solutions while accommodating a larger footprint of customers worldwide," according to a letter to Acacia's customers that was signed by executives from both companies. "The team at Acacia will continue operating our business consistent with our practice prior to Cisco’s acquisition announcement, in order to continue to support your business needs through closing. Both Acacia and Cisco are looking forward to the combined benefits that we believe we will be able to provide to all of our customers upon completion of the acquisition."

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.

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

Last week, Cisco announced it had upped its offer for coherent optical vendor Acacia from $70 per share to $115 per share in cash, or roughly $4.5 billion on a fully diluted basis, net of cash and marketable securities.

Earlier this month, Acacia attempted to scrap the first deal last wee by saying Cisco didn't get regulatory approval from SAMR by the deadline.  Following on the heels Acacia's announcement, Cisco said the same day 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.

Following 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 ahead of the Jan. 8 deadline that the agency had determined that its submission was "sufficient to address the relevant competition concerns."

RELATED: Acacia strikes back; files counterclaim against Cisco

Acacia then filed its answer and "affirmative defenses" in response to the complaint filed by Cisco in the Delaware Court of Chancery. At the same time, Acacia also filed a counterclaim against Cisco that sought 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."