Are Acacia Shareholders Getting Enough in the Acquisition?

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Acacia Communications Inc. (NASDAQ: ACIA) shares jumped on Tuesday after the firm announced that it would be acquired by Cisco Systems Inc. (NASDAQ: CSCO). This acquisition begs the question whether Acacia shareholders getting enough in the buyout.

Ultimately, Cisco is hoping that Acacia’s technology will enrich its optical systems portfolio. Management believes this also will allow the growing number of customers transitioning from chassis-based systems to pluggable technology to simplify operations and reduce network complexities.

Under the terms of the agreement, Cisco has agreed to acquire Acacia for $70 per share in cash, or for roughly $2.6 billion on a fully diluted basis, net of cash and marketable securities. The purchase price of $70 implies a premium of 40% over the 50-day moving average and a premium of 49.4% over the 200-day moving average.

Note that the acquisition is expected to close during the second half of Cisco’s fiscal 2020 year.

David Goeckeler, executive vice president and general manager of Cisco’s networking and security business, commented:

By innovating across software, silicon and optics, Cisco is reinventing every domain of the network with our intent-based architectures. With the explosion of bandwidth in the multi-cloud era, optical interconnect technologies are becoming increasingly strategic. The acquisition of Acacia will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers’ most demanding requirements.

Shares of Acacia were last seen up about 35% at $64.98, in a 52-week range of $31.42 to $66.22. The consensus price target is $61.46.

Cisco traded at $56.41 a share. The 52-week range is $40.25 to $58.15, and the consensus analyst target is $58.75.


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