Despite rumours, Cisco will probably still buy Tandberg


Rumours of the death of the Cisco-Tandberg merger are greatly exaggerated.


Over the past couple of days, there was plenty of speculation in the media that Cisco Systems Inc.’s offer to acquire video conferencing vendor Tandberg SA could fall through.


Published reports earlier this month quoted bankers as saying a group of Tandberg shareholders who collectively own 24 per cent of voting shares may reject Cisco’s US$3 billion offer to buy Oslo-based Tandberg.


The latest speculation was based on a blog post from Cisco chief strategy officer Ned Hooper.


Hooper did not say Cisco plans to walk away from the deal.


Let’s see what Ned Hooper did say in his blog post:


-Cisco’s offer represents a 38.3 per cent premium to the closing share price on July 15;


-Cisco managers “strongly believe our offer is a very good price for Tandberg shareholders”


He also pointed out some risks, including executing on what would be their first acquisition of a European publicly-traded company, and integrating their engineering and sales operations.


“We believe that video will become the core of the collaboration market, but, it will require substantial innovation and investment to drive this market transition,” Hooper stated. “No acquisition should be pursued or completed if it runs counter to the broader principles of prudence and financial fairness.”



Cisco, which is scheduled to report its first quarter financial results Wednesday, is a rich company. It had US $5.7 billion in cash last summer. Last year it had net earnings of US$6.1 billion on revenues of US$36 billion.


If 24 per cent of Tandberg shareholders reject the deal, well, that leaves 76 per cent who might accept it. It’s rare for companies whose directors and managers have recommended a merger to have it rejected by a majority of shareholders. And if Tandberg’s shareholders do decide to hold out for a better offer, they should take a lesson from Jerry Yang, former CEO of Yahoo Inc. Microsoft Corp. offered a huge premium when it offered to acquire Yahoo but walked away from the deal when Yahoo managers would not accept it.


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