Cisco Announces $2.8 Billion Acquisition of Acacia Ahead of 5G Push

Mainstream fifth-generation networks are only a few years away so mobile networks are pacing themselves to ensure we have enough high-capacity optical interfaces to handle the surge of data. But with knowledge of this, optical networking products company stocks surged.  For example, shares of NeoPhotonics Corporation made a 7 percent jump while Applied Optoelectronics Inc hit a rally of nearly 9 percent.  Lumentum Holdings Inc saw almost 4 percent growth while II-VI Inc rose 3.3 percent. Finally, Finisar Corp made a stride of nearly 3 percent. 

Much of the surge came out of the new Cisco Systems Inc acquisition of Acacia Communications.  The deal is worth $2.6 billion (on a fully diluted basis), valuing Acacia Communications at about $70 per share.  That represents a premium of 46 percent of Acacia’s closing price, on Monday.  At the same time, Acacia shares rose 35 percent to $64.86.

On this note, Acacia opened the day more than 38 percent up, adding at least $700 million to its market capitalization (now at $2 billion).  Oddly, Cisco was down 1 percent during the same premarket trading session.

While this deal is not expected to close until the second half of Cisco’s 2020 fiscal year, Cisco has been on a bit of a run lately. For example, the company had announced, in August, a $2.35 billion acquisition of cloud-based cybersecurity firm Duo Securty in a cash-and-stock deal.  Then, in December, Cisco also revealed plans to acquire semiconductor Luxtera in a $660 million in a cash-and-assumed-equity deal.

Cisco Chief Executive Officer Chuck Robbins assumed his role in July of 2015 and has been focused mostly on acquisitions as a means to bulk up the hardware giant’s new growth areas. This includes, of course, cloud computing, cyber security, and internet of things technology. 

All this mind, analysts are now saying that this acquisition will help to stabilize Cisco’s technology for service providers that are upgrading to 5G. It will also put the company’s optical portfolio out front of the coming shift towards the evolution of plug-and-play devices used across different communication segments. 

After all is said and done, this will mark Cisco’s biggest deal since the 2017 acquisition of business performance monitoring software company AppDynamics for $3.7 billion.

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