Acacia Communications fights Cisco claim with counterclaim in court

Jan. 12, 2021
At issue is whether a statement from China’s State Administration for Market Regulation (SAMR) that it had received information “sufficient to address the relevant competition concerns” constitutes official approval.

On the heels of the Delaware Chancery Court granting a Cisco (NASDAQ:CSCO) petition to prevent Acacia Communications, Inc. (NASDAQ:ACIA) from pulling out of their merger agreement ( see “Cisco garners temporary restraining order against Acacia Communications”), Acacia yesterday filed a counterclaim that it had legitimate grounds to terminate merger proceedings. At issue is whether a statement from China’s State Administration for Market Regulation (SAMR) that it had received information “sufficient to address the relevant competition concerns” constitutes official approval.

Acacia announced January 8 that it had terminated the agreement because approval from Chinese regulatory authorities had not been received by that day’s deadline (see “Acacia Communications says Cisco merger is off; Cisco disagrees”). Cisco filed a claim that day in the Delaware court that it had received the necessary approval on January 7, citing the SAMR statement. Cisco asked the court for a temporary injunction forbidding Acacia from walking away from the deal and an expedited proceeding to determine whether all conditions of the proposed deal had been met. The court granted both requests.

Acacia’s management held an analyst call late yesterday afternoon Eastern to discuss “recent developments” as well as to review unaudited figures for its fiscal fourth quarter and full year 2020. Company President and CEO Murugesan “Raj” Shanmugaraj repeated the assertion that the necessary regulatory approvals had not arrived on time as the reason for pulling out of the agreement but provided no further details. Neither he nor CFO John Gavin, who also represented Acacia on the call, fielded questions from attendees.

Meanwhile, the company filed an 8K form with the SEC in which it stated its intention to hold an annual meeting by June 30, 2021, if the merger does not go through.

In filing its claim Friday, a lawyer for Cisco speculated that Acacia believes the price per share in the merger agreement is significantly lower than the stock’s present value. Cisco offered $70.00 per share in cash when the agreement was signed in July 2019 (see “Cisco to buy Acacia Communications for optical transceiver, components play”). Needham & Co. yesterday estimated Acacia’s shares could be worth $95.00 to $110.00, based on the value of its peers. Needham analyst Alex Henderson wrote he believes Acacia will prevail in the dispute.

Later, Rosenblatt analyst Ryan Koontz raised the price target of Acacia’s shares to $110.00 from $70.00, while Tim Savageaux of Northland raised his estimate to $90.00 from $65.00, according to Seeking Alpha.

Unaudited results

In the analyst call January 11, Shanmugaraj and Gavin stated Acacia saw revenue of $160 million to $164 million during the fourth quarter and $579.3 million to $583.3 million for the full fiscal year 2020. The results compare favorably to 4Q19 ($128.7 million) and full year 2019 ($464.7 million). GAAP diluted earnings per share (EPS) for the fourth quarter of 2020 was reported as between $0.73 to $0.82, with non-GAAP diluted EPS at $0.88 to $0.97 for the quarter. Full-year EPS was described as $2.03 to $2.11 (GAAP) and $2.86 to $2.95 (non-GAAP). For full-year 2019, Acacia earned GAAP diluted EPS of $0.77 and non-GAAP diluted EPS of $1.86.

The Acacia executives did not provide guidance for the current quarter.

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