
Cisco is purchasing cybersecurity business Splunk for $157 per share through a full cash transaction. To fund the agreement, Cisco will be using a mix of cash and debt. This acquisition is the largest ever executed by Cisco and continues the firm's 2023 focus of buying into cybersecurity businesses.
Cisco announced on Thursday that it will be acquiring cybersecurity software company Splunk for around $28 billion. Every share of Splunk will be bought for $157. As a result of the news, Splunk's share prices saw a 21% increase Thursday morning, while Cisco's dropped 3.3%. Chairman and CEO Chuck Robbins commented that the acquisition will enable them to "make organizations of all sizes more secure and resilient." The purchase is expected to be finalized during the third quarter of 2024. Cisco believes that when the deal is complete, it will be beneficial to cash flow and gross margin in the first year, and to non-GAAP earnings per share within two years. Robbins declared on a conference call that the combination of the two companies will make them one of the largest software companies globally. He also added on CNBC's Squawk on the Street that the organizational synergies will begin to be seen and felt within 12 to 18 months. To finance the acquisition, Cisco will be using a combination of cash and debt.
The response to the deal was divided among analysts, who raised questions regarding possible product duplication, governmental regulation, and the cost paid by Cisco for a business that had, from the point of view of one expert, "underwhelmed" with its switch to the cloud. Splunk and CEO Gary Steele denied these apprehensions and said that they had scores of clients counting on the solutions their customer-managed environment offered. Furthermore, Steele and Robbins asserted that they did not expect government authorization for Splunk's China operations to be necessary.
Splunk, a cyber safety company helping corporations monitor and analyze their data to ascertain opportunities to decrease the chances of attack, is somewhat different to Cisco, producer and dealer of communication and networking hardware and software. Steele had just over a year with Splunk, having been CEO of the cybersecurity company Proofpoint, which was acquired by Thoma Bravo in 2021 for $12.3 billion. After the closure of the transaction, Steele will join Cisco's executive leadership team.
If the contract is repudiated by Cisco, or they are obliged to do so because of legal intervention, they will have to pay Splunk a $1.48 billion termination fee, according to a regulatory form. If Splunk declines continuance, they must pay Cisco a $1 billion breakup fee.
Cisco has purchased four firms in 2023 alone: Armorblox (threat detection platform); Oort (identity management); Valtix and Lightspin (both cloud security businesses). It's biggest acquisition as of yet remains the procurement of Scientific Atlanta for nearly $7 billion.
Cisco's legal counsel was made up of Tidal Partners, Simpson Thacher, and Cravath, Swaine & Moore, while Splunk was represented by Qatalyst Partners, Morgan Stanley, and Skadden, Arps, Slate, Meagher & Flom.
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