12 Jan Judge grants temporary court order to block Acacia from ending $2.6B deal with Cisco
On Friday, Cisco was granted a temporary court order that blocked Acacia from pulling the plug from on the companies $2.6 billion merger.Friday morning, Acacia Communications 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 extended end date.
“As such, Acacia exercised its right to terminate the proposed transaction in accordance with the terms of the merger agreement,” Acacia said in its press release.
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Shortly after Acacia’s announcement, Cisco said 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.
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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.
“Big thank you to SAMR for last week’s approval of our merger with Acacia,” Robbins said in his tweet. “We deeply appreciate SAMR and their timely action in this process. We agreed to a strong set of protections for Chinese customers and look forward to continuing strong engagement in China.”
Acacia didn’t respond Monday morning to an email seeking comment on the court’s restraining order and SAMR’s approval. Acacia is reporting its fourth quarter results on Monday after the market closes and plans to “discuss recent developments.”
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.
During the hearing, a lawyer for Cisco said Acacia was trying to abort the deal that was announced in July of 2019 because it believed its valuation had increased since then, and that it was trying to negotiate a higher offer, according to Bloomberg.
RELATED: Cisco’s Acacia deal a key component of its core networking strategy
With Acacia in hand, Cisco would have a larger product portfolio to sell to web-scale providers, service providers and data center operators that are adding cloud and data capacity. Acacia’s optical portfolio would also position Cisco to win a bigger chunk of 5G-related revenues from carriers.
The deal was supposed to close in the second half of Cisco’s fiscal 2020, and it had been approved by the United States, Germany and Austria. China, which was a closing condition of the deal, became a sticking point for the closure after SAMR dragged its heels.
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.”
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Just over a year ago, Cisco announced its “Internet for the Future” strategy at an event in San Francisco, which included its own solutions across silicon, optics and software. With its deep expertise in coherent optics, Acacia would be a key element in Cisco’s core networking strategy.
RELATED: Cisco’s Acacia deal disrupts optical, routing markets
Acacia would also be a good fit with Cisco’s previous acquisitions of CoreOptics, Luxtera and Lightwire on the silicon photonics side. On the ASIC side, Cisco bought Leaba in 2016. Acacia would round out those previous investments by bringing components, modules and digital signal processors (DSPs) for optical subsystems within switches, routers and optical networking gear.
Maynard, Mass.-based Acacia has three product categories—pluggable modules, semiconductors and embedded modules—that would be added into Cisco’s optical systems and optics portfolio if the deal goes through.
Pluggables are a growing trend across the optical space as web-scale providers, service providers and data center operators look to deploy more 400G gear and services this year. Using ZR/ZR plus pluggable optics allows service providers to eliminate transponders in the their WDM (wavelength-division multiplexing) networks.