Following weeks of speculation about how Cisco Systems Inc. (NASDAQ:CSCO) might react to Tandberg ASA shareholders who are carping about the networking giant's $3 billion offer for the company, Cisco's strategy chief Ned Hooper came out with a blog post Monday with a bit more detail as to why he thinks the price is fair.
"We strongly believe our offer is a very good price for Tandberg shareholders," said Hooper in a post on
Cisco's The Platform blog.
He notes that the offer, which was
unveiled on Oct. 1, is now about $100 million more expensive because of currency exchange costs. Hooper's post is a response to what he called "significant speculation and rumor in the media" about the tech giant's $3 billion offer for the Norwegian video communications company.
Hooper has taken to the Web because of speculation it could raise its offer, take a minority stake or drop the bid after an Oct. 15 announcement by Swedish brokerage SEB Enskilda AS saying a group with a 24% holding in Tandberg
does not like the deal terms.
The deal needs 90% shareholder approval and has the backing of Tandberg management. In a
Friday story (The Deal Pipeline subscription required), Miller Tabak + Co. LLC analyst Alex Henderson argued that if Cisco felt compelled to walk away from the Tandberg deal, it could instead acquire Tandberg rival Polycom Inc. of Pleasanton, Calif., and as a result Tandberg, instead of becoming part of the world's largest data networking company, would face a very large competitor.
Cisco at this point still appears intent on capturing Tandberg, but Hooper warned that it won't happen at any cost.
He wrote:
For all these reasons we believe the time is right for Cisco and
Tandberg to come together to help accelerate global adoption of
collaboration technology through interoperable, standards-based
products. However, no acquisition should be pursued or completed if it
runs counter to the broader principles of prudence and financial
fairness.
Hooper wrote that there are inherent risks Cisco faces in the deal, including the task of capturing synergies and executing on its first ever acquisition of a European public company, to the overall integration complexity associated with engineering and sales spread across both Norway and the U.K.
"Our offer price is based on a simple premise for both sets of shareholders -- fairness and value. Is a 38.3% premium fair for Tandberg shareholders? Absolutely," Hooper wrote. He based that premium on Tandberg's July 15 closing price.
A Reuters report notes that a consultant's report commissioned by Tandberg said on Monday that Cisco's offer is "fair from a financial point of view." Hooper didn't mention that in his blog, but it is likely to be waved in the face of balking group of Tandberg shareholders.
Hooper may also want to get working on another blog with some of his fellow senior execs addressing a Breakingviews report that challenges the entire strategy of Cisco for the past decade of acquiring rivals and buying back stock. The article says if Cisco follows
the acquisition machine model, the difficulty in running the company smoothly while mounting ever-larger deals will become increasingly evident. -
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