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Acacia Shares Go Back to the Future as Cisco Raises Bid to Buy the Firm to $4.5 Billion

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Shares of Acacia Communications launched 32% higher after the company reported that Cisco Systems has agreed to amend its proposed merger agreement by raising its offering price to purchase the company from $70 to $115 per share.

Acacia Communications Inc. (ACIA:NASDAQ) and Cisco Systems Inc. (CSCO:NASDAQ), today announced "an amendment to the definitive merger agreement under which Cisco previously agreed to acquire Acacia." The firms reported that under the terms of the amended buyout agreement, Cisco will acquire Acacia for $115 per share in cash, or for approximately $4.5 billion on a fully diluted basis.

The raised share offering price is roughly 64% higher than the $70 per share or approximately $2.6 billion bid that Cisco put forward in July 2019 that was originally expected to close in H2/20. The companies stated in the report that the acquisition is now expected to close by the end of Q1/21, though the transaction still remains subject to certain closing conditions and approval by Acacia shareholders.

The firms noted that after the transaction is finalized, Acacia Communications' CEO Raj Shanmugaraj and the current Acacia employees will join as members of Cisco's Optics business.

Cisco System's Chairman and CEO Chuck Robbins stated, "I am delighted that Cisco and Acacia have decided to come together in this mutual deal...We look forward to welcoming Raj and the Acacia team to Cisco to offer our customers world-class coherent optical solutions to power the Internet for the future."

The companies stated that Cisco's acquisition of Acacia serves to reinforce its commitment to optics as a critical component in enhancing its '"Internet for the Future" strategy and will enable the firm to address vast and expanding IT needs. Cisco noted that it is "committed to supporting Acacia's existing and new customers around the world that require industry-leading coherent optics, digital signal processing / photonic integrated circuit modules and transceivers for use in networking products and data centers."

Bill Gartner, SVP and general manager of Cisco Optical Systems and Optics Group, remarked, "Both Cisco and Acacia have been focused on helping customers create a simpler operations environment, with a shared vision for the future of routing and switching with pluggable optics...Together we will ignite our 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' President and CEO Raj Shanmugaraj commented, "We maintain our strong conviction in the strategic benefits of joining the Cisco family and believe it will enable us to better support our existing customers, while reaching an expanded footprint of new customers globally...We are pleased to have reached this agreement with Cisco and are excited to move forward with the combination which we believe will transform the optical industry, while providing great opportunities for Acacia employees to continue their innovation."

Acacia, headquartered in Maynard, Mass., is an existing supplier of Cisco that designs and manufactures optical interconnect technologies that help webscale companies, service providers and data center operators to meet the fast-growing consumer demands for data. The company advised that its "siliconization of optical interconnect" allows it to offer products at higher speeds and density that in turn consume much less power.

Cisco Systems has a market cap of around $192 billion and is known worldwide as a leader in technology that powers the internet. The firm is engaged in the design and sale of a range of technologies across networking, security, collaboration, applications and the cloud. It is best known for technologies for infrastructure platforms including switching, routing, data center server products and wireless designed to work in sync to deliver networking capabilities and transport and store data.

Acacia Communications began the day with a market capitalization of around $3.6 billion with approximately 42.12 million shares outstanding and a short interest of about 6.4%. ACIA shares opened more than 31% higher today at $113.47 (+$27.02, +31.26%) over yesterday's $86.45 closing price and reached a new 52-week high price this afternoon of $114.73. The stock has traded today between $112.90 and $114.73 per share and is currently trading at around $114.00 (+$27.56, +31.87%).


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