Cisco made further progress with plans to buy Acacia Communications, mere days after the deal had appeared to be on life support.

China's antitrust regulator, the State Administration for Market Regulation (SAMR), has now approved the merger on condition that the companies ensure fair competition.

The green light from China came as Cisco amended its offer for the coherent optical interconnect components business from $70 a share to $115 per share in cash, or roughly $4.5 billion on a fully diluted basis, net of cash and marketable securities.

Figure 1: Last leg: Cisco's quest to acquire Acacia began back in July 2019.
(Source: Cisco)

Reuters said China's approval was the only remaining closing condition for the deal and noted that SAMR has authority similar to the European Commission to approve acquisitions involving multinational corporations.

The deal remains subject to Acacia stockholder approval, but the companies expect to wrap up the transaction by the end of Q1 2021. Acacia employees, including CEO Raj Shanmugaraj, will then join Cisco's optics business.

Long time coming

The acquisition of Acacia, which would elevate Cisco as a leader in pluggable and interoperable coherent optics, had been in doubt as recently as early January when Acacia argued the Chinese government hadn't cleared the merger in time.

Cisco disputed that position, insisting that SAMR had cleared it in time. It now seems that Cisco was correct.

In a statement posted on its website and dated January 14, SAMR provided a detailed description of the winding path that the approval process has taken.

However, it ultimately gave the go-ahead to the merger on the condition that the companies agree to honor contracts with existing clients in China for the next five years.

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Among other requirements, the combined entity should continue to provide Chinese customers with access to its products "based on the principles of fairness, reasonableness and non-discrimination," the statement said.

Cisco has already pledged to support Acacia's existing and new customers that require coherent optics, digital signal processing/photonic integrated circuit modules and transceivers for use in networking products and data centers.

Cisco began its quest to buy Acacia in July 2019. Cisco said at the time that the acquisition "reinforces" its commitment to optics and shores up a strategy focused on coherent optical technologies and products.

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— Anne Morris, contributing editor, special to Light Reading