The logo of networking gear maker Cisco Systems Inc is seen during GSMA’s 2022 Mobile World Congress (MWC) in Barcelona, Spain February 28, 2022. REUTERS/Nacho Doce Acquire Licensing Rights Sept 21 (Reuters) – Cisco Systems (CSCO.O) has agreed to buy cybersecurity firm Splunk (SPLK.O) for about $28 billion in its biggest-ever deal to beef up its software business and capitalize on the rising use of artificial intelligence, the companies said on Thursday. The deal will help reduce Cisco’s reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand. Cisco offered $157 in cash for each share of Splunk, representing a 31% premium to the company’s last closing price. Splunk shares jumped 23% to trade $9 short of the offer price before the opening bell, while Cisco dropped nearly 5%. « Combined, Cisco and Splunk will become one of the world’s largest software companies and will accelerate Cisco’s business transformation to more recurring revenue, » a joint statement said. Cisco already has a data-security partnership with Splunk, whose more than 15,000 customers include many prominent companies such as Coca-Cola (KO.N), Intel (INTC.O) and Porsche. After a surge in revenue growth last year to nearly 40%, Splunk has grappled with an industry-wide slowdown in demand in 2023 wrought by rising interest rates and sticky inflation. Its acquisition will accelerate revenue growth and gross margin expansion at hardware-reliant Cisco in the first fiscal year after the deal’s close, according to the companies. Cisco had also made a more than $20 billion approach for Splunk in 2022 but that fell apart, the Wall Street Journal had reported. « Cisco bought a good synergistic business at a good price. It’s a win for both parties, » said Thomas Hayes, chairman of hedge fund Great Hill Capital. « This will give Cisco an edge in AI-enabled security moving forward. » The overlap in the security business could, however, invite antitrust scrutiny. One analyst also raised concern about the « underwhelming » transition to the cloud at Splunk. The deal, which was unanimously approved by the boards of both Cisco and Splunk, is expected to close by the end of the third quarter of 2024, subject to regulatory approvals. It will not require China’s nod. If the deal is shelved, Cisco will have to pay a termination fee of $1.48 billion. Tidal Partners, Simpson Thacher & Bartlett and Cravath, Swaine & Moore were advisers to Cisco. Qatalyst Partners, Morgan Stanley & Co, and Skadden, Arps, Slate, Meagher & Flom advised Splunk. The U.S. current account deficit narrowed sharply in the second quarter as surpluses on services and primary income offset a shortfall on goods, data showed on Thursday. EU antitrust regulators on Thursday fined German arms maker Diehl 1.2 million euros ($1.3 million) for taking part in a military hand grenade cartel with its rival Ruag over a period of 14 years. Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
