Cisco seeks court approval to force Acacia to finish $2.6 billion merger

Updated: Acacia says that closing conditions set by the Chinese government were not met. Cisco does not agree.

Cisco is taking Acacia Communications to court to prevent the company from walking away from an agreed $2.6 billion merger. 

Maynard, Massachusetts-based Acacia is a component supplier and maker of high-speed optical interconnect products for networking purposes.

In July 2019, Cisco announced the acquisition of Acacia, which supplied components to the company. Cisco said at the time that the purchase would benefit the firm's existing enterprise network portfolio.

Under the terms of the deal, Cisco was required to meet a set of closing conditions, a standard procedure in most merger and acquisition deals. According to Acacia, however, these conditions have not been met in time. 

On January 8, Acacia said the company "elected to terminate its merger agreement," effective immediately, and accused Cisco of not obtaining approval from the Chinese government's State Administration for Market Regulation (SAMR).

"[As this] was not received within the timeframe contemplated by the merger agreement, Acacia did not have an obligation to close the merger before the arrival of the January 8, 2021, extended end date," the company said. "As such, Acacia exercised its right to terminate the proposed transaction in accordance with the terms of the merger agreement."

Cisco told the component supplier it intended to dispute the termination, and in response, Acacia said it would fight its corner. 

On the same day, Cisco went to the US Delaware Court of Chancery to launch an investigation into whether the company had met the conditions set to close the merger, or not. 

Cisco says it was previously notified by SAMR that information provided by the company was "sufficient to address the relevant competition concerns." 

In addition, the tech giant asked for an order to be issued that prevents Acacia from terminating the deal "until the court resolves these matters." 

According to Bloomberg, this temporary court order has been granted and the matter is also set to be expedited. 

A member of Cisco's defense team, William Lafferty, has accused Acacia of trying to walk away from the deal in order to negotiate a deal valuing the company at a higher price, adding that losing the strategic merger could cause Cisco "irreparable harm."

Update January 12, 6.15am GMT: Acacia has now filed its defense with the court alongside a countersuit, seeking confirmation that the merger agreement was justifiably terminated as "the required Chinese regulatory approval was not obtained and the merger did not close before the agreed-upon termination date under the agreement."

"Acacia continues to be bound by the terms of the merger agreement pursuant to a temporary restraining order granted by the Delaware Court of Chancery pending resolution of the litigation with Cisco or as otherwise agreed by the parties," the company said.

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