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Cisco announced its acquisition of Scientific-Atlanta on November 18, 2005, agreeing to pay $43 per share in cash. Cisco described the offer as approximately $6.9 billion in gross value, or about $5.3 billion net of Scientific-Atlanta’s cash. The companies completed the deal in February 2006, when Cisco’s completion release reported approximately $7.0 billion gross and $5.1 billion net of cash.
Why did Cisco buy Scientific-Atlanta?
Cisco wanted to expand beyond the networking equipment that carried data and into the systems that delivered television and other services to homes. Scientific-Atlanta made digital set-top boxes and equipment and software for distributing video across broadband networks.
Cisco presented the combination as a way to build an end-to-end platform for “triple play”: video, high-speed Internet and voice services over carrier networks. Scientific-Atlanta’s video technology would be combined with Cisco’s IP networking architecture, extending the companies’ reach from service providers’ networks to the digital home. Cisco also described the goal as supporting integrated media services on an open platform. Cisco’s November 18, 2005 announcement set out that strategic rationale.
How much did Cisco pay?
The headline $6.9 billion figure refers to the approximate gross purchase price Cisco announced in November 2005. The announced offer was $43 in cash for each Scientific-Atlanta share, and Cisco estimated the price at about $5.3 billion after subtracting Scientific-Atlanta’s cash.
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At completion, Cisco’s February 27, 2006 release reported approximately $7.0 billion in gross consideration and approximately $5.1 billion net of cash. These are figures from different stages of the transaction, so the announcement and completion amounts should not be treated as interchangeable. Cisco’s completion release gives the later amounts.
| Transaction reporting point | Gross amount | Net of Scientific-Atlanta cash | Basis |
|---|---|---|---|
| November 18, 2005 announcement | Approximately $6.9 billion | Approximately $5.3 billion | $43 cash per share; Cisco estimate in its announcement |
| February 27, 2006 completion release | Approximately $7.0 billion | Approximately $5.1 billion | Cisco’s reported completion consideration |
When did the acquisition close?
The deal was announced on November 18, 2005. The U.S. Hart-Scott-Rodino waiting period ended on December 30, 2005, but approvals in other jurisdictions were still required. Scientific-Atlanta shareholders approved the acquisition on February 2, 2006.
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Cisco’s annual report records the legal completion date as February 24, 2006. Cisco announced the completion publicly on February 27, 2006. Those dates describe separate events: the first is the recorded completion date, while the second is the date of the public release. Cisco’s annual report records the February 24 completion date.
What did Scientific-Atlanta make?
Scientific-Atlanta supplied technology and systems used by cable and other service providers to deliver communications and entertainment services. Its products included digital interactive set-top boxes, digital-content distribution systems, broadband transmission networks and subscriber systems supporting video, high-speed Internet and voice over IP (VoIP).
A set-top box was the most visible consumer-facing part of that business: it connected a customer’s television to a provider’s digital video service. The wider product range helped providers distribute content and manage services across their networks. Scientific-Atlanta reported fiscal 2005 revenue of $1.91 billion, more than 7,500 employees and a founding date of 1951 in its 2005 company announcement. The SEC-filed announcement includes those company details.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the deal meant for shareholders
For Scientific-Atlanta shareholders, Cisco’s announced terms were a cash offer of $43 per share. The companies’ releases describe the strategic aim as expanding Cisco’s carrier and home-service platform; they do not establish how the acquisition ultimately affected Cisco’s long-term share price or the performance of the combined business.
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Scientific-Atlanta chairman, CEO and president Jim McDonald said, “We believe that this combination of Cisco and Scientific-Atlanta will benefit our shareholders, our customers and our employees.” That was the company’s stated expectation at the time, rather than a measured result of the acquisition.
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