Analyst Note| Mark Cash |
Narrow-moat Cisco Systems has agreed to purchase Acacia Communications for $4.5 billion, or about $115 per Acacia share in cash. This is an update from the original July 2019 proposal worth $2.6 billion. Earlier this year, Acacia terminated the prior merger after stating that Cisco did not obtain the proper approval from the Chinese government for the deal before Jan. 8. After the termination, Cisco initiated legal action, claiming it had received the required approval, and Acacia countersued. The updated deal is expected to close in the first quarter of fiscal 2021. After updating our model for the increased purchase price, we are maintaining our $48 fair value estimate for Cisco and see the shares as slightly undervalued.