Wednesday, December 2, 2009

Cisco's Offer for Tandberg

Cisco Systems has extended the offer period in its effort to acquire Tandberg, a Norway based company. It raised its bid in November to 10 billion Norwegian crowns (or $3.37 billion US dollars) -- a raise of 10%, and this latest extension likely means that the higher offer is getting some traction.

Reuters is quoting one analyst thus: "I think Cisco will succeed. They would not have extended the offer if they had a low acceptance level."

Cisco is the world's largest network equipment maker. Tandberg is the leader in videoconferencing equipment -- which sounds like a natural hook-up. Apparently, videoconference is a market segregated by "tiers," and Tandberg's great strength is in the mid-tier, in terms of price and sophistication.

Even before the increase, Cisco's initial offer was a 38.3% premium on the closing share price of Tandberg as of July 15. That is how it is characterized on Cisco's corporate blog in a entry by senior vice president Ned Hooper.

But is July 15th a relevant day? Hooper calls it "one day prior to major media reports of a possible transaction."

But as you'll see if you go to that blog entry and look at the comments beneath it, some doubt the significance of July 15th as a measuring point. The Norwegian stock market as a whole apparently rose significantly in the weeks subsequent to that "major media report," so some at least of the change in Tandberg's stock value reflects that broader rise, and is unrelated to the possibiliuty of this transaction. Since the investors in Tandberg would have participated in that rise anyway (so runs the reasoning) estimate of the true size of the "premium" have to be adjusted.

No comments: