After a hard-fought battle, Cisco Systems Inc. has come closer to acquiring videoconferencing vendor Tandberg SA, with ownership of 91.1 per cent of the company's shares.
Cisco had to raise its initial US$3 billion offer and extend the acceptance deadline three times in order to gain control of Oslo-based Tandberg. Cisco's initial offer for Tandberg, made on Oct. 1, was not approved by the required 90 per cent of shareholders.
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Late Thursday, at the expiration of the third acceptance deadline, Cisco said it controlled 89.1 per cent of Tandberg shares. The condition for ownership of the company was control of 90 per cent of Tandberg shares, but Cisco waived this condition based on a two per cent stake it acquired in November, according to published reports.
Of the 140 or so acquisitions Cisco has made in the past 16 years, Tandberg was perhaps the most challenging. Although Tandberg’s board of directors endorsed the deal, two groups of shareholders controlling 30 per cent of Tandberg balked at the initial US$3 billion offer. And then two investment firms representing other stakeholders issued a public letter to Cisco CEO John Chambers and Senior Vice President Ned Hooper stating that Cisco was undervaluing the company and spelling out specific reasons why it should hike its offer.
Cisco’s initial offer, of 153.5 Kroner per share, was 11 per cent higher than the market value the previous day.
Cisco relented on Nov. 16, raising its offer for Tandberg to US$3.4 billion and extending the acceptance deadline to Dec. 1 from Nov. 18. The Nov. 18 deadline had previously been extended from Nov. 9.
On Dec. 1, Cisco again extended the acceptance deadline by two days, to Dec. 3.
By acquiring Tandberg, Cisco is looking to fill out its desktop and midrange videoconferencing product portfolio. Its high-end TelePresence offerings can cost hundreds of thousands of dollars and are apparently too costly and elaborate to scale downmarket, as Cisco initially intended.
Cisco will also now become the market leader in videoconferencing. Tandberg is the current leader with about 40 per cent share, ahead of Polycom Inc., according to Wainhouse Research LLC.
Cisco views video as the "killer app" that will fill up bandwidth and drive equipment upgrades into the next decade.