Acacia Communications says it had not received approval from the Chinese State Administration for Market Regulation (SAMR) before the deadline, but Cisco disagrees
Back in the summer of 2019, Cisco first announced plans to merge with optical interconnect products manufacturer Acacia Communications for $2.6 billion. The relationship between the two companies was fairly well established, with Acacia supplying Cisco for some time.
On Friday, however, Acacia said it had taken the decision to pull out of the deal, active immediately, claiming it had failed to receive approval from the SAMR by the agreed deadline. However, Cisco says that the deal had already received approval, arguing that they had been informed of the positive decision on Thursday.
Now, Cisco says it will seek a court resolution for the dispute. A hearing on Friday saw Cisco lawyers claim that Acacia may be trying to exit the deal in an attempt to renegotiate more favourable terms, since the company’s valuation has increased since the deal was struck a year and a half ago.
Part of the issue here seems to be the vague nature of the approval provided. In Cisco’s press release on the topic, they quote the ‘approval’ from the SAMR, which said their submission was ‘sufficient to address the relevant competition concerns’ but seemingly did not provide explicit affirmation for the deal.
For Cisco, the deal with Acacia was intended not only to help to strengthen the company’s offerings in software, silicon, and optics, but also make more headway into the Chinese market – a market where it has been struggling to grow recently. Of course, the political relationship between China and the US has become much more troubled since 2019, with numerous US sanctions imposed on Chinese corporations like Huawei and ZTE, leaving Cisco, as a major US firm, potentially in the firing line for Chinese retaliation.
Also in the news: