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Cisco Acquired Starent Networks for $2.9 Billion: Deal Terms and Strategic Rationale

Cisco announced a roughly $2.9 billion acquisition of Starent Networks in October 2009 and completed it on December 18. The offer was $35 cash per share.
From TheFinanceBase Team2 min to read
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Cisco announced an agreement to acquire Starent Networks on October 13, 2009, for approximately $2.9 billion. The offer was $35 in cash per Starent share, with outstanding equity awards assumed. Cisco completed the acquisition on December 18, 2009, making Starent a wholly owned subsidiary.

How the deal unfolded

  1. October 13, 2009: Cisco and Starent announced a definitive agreement approved by both companies’ boards. The transaction was subject to customary closing conditions and regulatory review. Cisco’s announcement described the proposed terms.
  2. December 11, 2009: Starent shareholders approved the merger agreement at a special meeting, according to the company’s SEC filing.
  3. December 16, 2009: Cisco said it had received clearance from the U.S. Department of Justice and Federal Trade Commission. Cisco’s clearance notice reported the regulatory milestone.
  4. December 18, 2009: Cisco announced that the acquisition was complete. Starent’s filing records that it became a wholly owned Cisco subsidiary. Cisco’s completion announcement and the Starent completion filing document the closing.

What Cisco paid

The announced headline transaction consideration was approximately $2.9 billion. Cisco offered $35 in cash for each Starent share and said it would assume outstanding equity awards. Starent’s closing filing says the approximately $2.9 billion aggregate consideration was funded from cash on hand. The $2.9 billion figure is the approximate transaction consideration, not a claim about later accounting measurements or the deal’s eventual effect on Cisco’s earnings.

Why Starent fit Cisco’s strategy

Starent supplied IP-based mobile infrastructure for mobile and converged carriers. Its systems provided core network functions and services that managed connections from radio access networks to a mobile operator’s packet-core network. Cisco’s 2009 announcement described support for 2.5G, 3G and 4G networks, including CDMA2000 (1X and EV-DO), UMTS/HSPA and WiMAX.

Cisco presented the acquisition as a way to expand its mobile Internet offering to service providers by combining its video and IP capabilities with Starent’s mobile infrastructure. That was the companies’ stated strategic rationale, not proof of a particular financial result. Starent had reported $254.1 million in revenue for the year ended December 31, 2008, a 74 percent increase from the prior year, according to Cisco’s announcement and its SEC-filed release.

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What Cisco forecast—and what the figures do not establish

Cisco cited a forecast that mobile data traffic would more than double every year through 2013. This was a forecast made in 2009, not a current measurement or an outcome established by the deal announcements. Cisco also projected non-GAAP earnings dilution in fiscal 2010 and 2011, followed by accretion in fiscal 2012. Those statements were projections at announcement; they do not establish what the acquisition ultimately contributed to earnings.

Quick Recap

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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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