The Cisco-Acacia Deal Is Back On. What This Means for Investors.

Technology

Published: January 14, 2021 10:22 am

It’s back on again. After many thought the deal was sunk, Acacia Communications Inc. (NASDAQ: ACIA) and Cisco Systems Inc. (NASDAQ: CSCO) are ready for a merger deal after previously calling the deal dead due to Chinese regulators. Now that it is back on, Acacia is getting even more out of the deal.

The deal originally was valued up to $2.6 billion, but now it is worth up to $4.5 billion in aggregate. Accordingly, Cisco is buying out Acacia for $115 per share in cash.

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The $115 price point implies premiums of 59.3% and 67.0% from the 50-day and 200-day moving averages of $72.17 and $68.86, respectively.

Upon completion of the acquisition, CEO Raj Shanmugaraj and Acacia employees will join Cisco’s Optics business.

The original deal was agreed to in July of 2019. At that time, Cisco had signed on to pay roughly $70 per share for Acacia for an aggregate of $2.6 billion. This deal was expected to close in the second half of Cisco’s fiscal year, which ends in July.

Cisco and Acacia expect to complete the acquisition by the end of the first calendar quarter of 2021, subject to closing conditions, including Acacia stockholder approval.

Cisco’s management noted that both companies are focused on helping customers create a simpler operations environment, with a shared vision for the future of routing and switching with pluggable optics. Together Cisco and Acacia will ignite a strategy to transform the optical world as we know it, with innovative solutions to boost network capacity inside and outside the data center.

Acacia Communications stock traded up about 31% on Thursday to $113.47, in a 52-week range of $60.62 to $114.34. The consensus price target is $86.67.

Cisco Systems stock traded at $45.35. The 52-week range is $32.40 to $50.28, and analysts have a consensus price target of $48.74.