Acacia, Cisco Trade Claims in Merger Fight
A dispute over Chinese regulatory approval of its acquisition of Acacia Communications Inc. prompted Cisco Systems to seek a court order compelling the optical component maker to move ahead with the $2.8 billion transaction.
Acacia said Monday (Jan. 11) it has filed a counterclaim.
Cisco announced its acquisition of Acacia in July 2019. Acacia asserted late last week it was free to terminate the deal due to lack of timely Chinese regulatory approval. Cisco quickly countered, saying it had indeed received regulatory approval, petitioning a Delaware court to confirm that it had met all conditions for closing the transaction.
Cisco (NASDAQ: CSCO) said it was notified on Jan. 7 by China’s State Administration for Market Regulation that the terms of the proposed acquisition “are sufficient to address relevant concerns.”
Acacia (NASDAQ: ACIA), of Maynard, Mass., nevertheless moved to terminate the transaction, which had been expected to close last year. U.S. and European regulators had previously signed off on the deal.
In terminating the acquisition, Acacia said it was no longer obligated to complete the merger before the end of last week.
Cisco petitioned the Delaware Court of Chancery seeking to block termination of the merger. It also sought a court order requiring Acacia to close the transaction. The company confirmed reports that the court granted its request for a temporary restraining order blocking Acacia from terminating the deal.
In a Twitter post Sunday (Jan. 10), Cisco CEO Chuck Robbins thanked Chinese regulators for approving the merger with Acacia. “We agreed to a strong set of protections for Chinese customers and look forward to continuing strong engagement in China,” Robbins said.
According to reports, a Cisco attorney argued during a hearing that Acacia sought to terminate the merger in hopes of a better offer based on a higher valuation since the merger with Cisco was announced.
Acacia did not respond to a request for comment.
In a filing with the U.S. Security and Exchange Commission on Jan.11, Acacia said it has launched a counterclaim seeking a ruling that it “validly terminated” its merger agreement with Cisco. “Acacia intends to vigorously defend itself,” said Murugesan Shanmugaraj, Acacia’s president and CEO.
Since the 2019 merger agreement, Acacia has seen increased demand for its optical interconnects, especially among hyper-scalers providing more cloud-based services to remote workers during the pandemic.
“Acacia is a stronger company today than we were in 2019,” Shanmugaraj said during a conference call.
Company officials did not take questions from analysts or reporters.