Cisco Systems Inc. today said that it has agreed to acquire Acacia Communications Inc. for about $4.5 billion, nearly $2 billion more than an offer it made to the chipmaker in 2019.

In July of 2019, the companies inked a deal that specified Cisco would buy Acacia for approximately $2.6 billion. They had originally planned to close the transaction within six months. However, the companies didn’t complete the process in the expected time frame and, at one point, it appeared as if the deal could potentially be called off entirely.

Acacia last week issued a statement saying that it “did not have an obligation to close” the original $2.6 billion acquisition agreement with Cisco because the latter company didn’t secure all the required regulatory approvals in the allotted time frame. Cisco pushed back, saying that it did in fact meet all the conditions necessary to complete the acquisition. The networking giant even filed a lawsuit with a Delaware court to block Acacia from terminating the deal until the matter is resolved.

The amended $4.6 billion agreement announced today brings the brief legal dispute to an end. A Cisco spokesperson told the Wall Street Journal this morning that the company would file a motion to dismiss its suit today.

Acacia makes specialized chips for powering fiber optic network equipment. One of its main focus areas is designing digital signal processors, which manipulate the properties of the light beams used to transmit data over optical networks to increase the distance over which packets can be sent and the amount of information that can be sent at once. Acacia is also a supplier of silicon photonics chips that turn electrical data into light and vice versa.

The acquisition is set to buy Cisco a new source of revenue growth in the infrastructure market. Acacia’s chips require less space and power than some of the legacy systems historically used to manage data in optical networks and, as a result, are seeing strong demand, having generated revenues of $72.9 million for the company during the quarter ended March 31. That figure represented a 44% year-over-year increase.

Cisco is one of the biggest buyers of Acacia’s chips, having contributed 15% of its revenues in the first nine months of 2020 according to the Journal.

Under the new acquisition agreement, Cisco will pay $115 for each share of Acacia. The $4.5 billion valuation the deal gives the chipmaker is on a fully diluted basis, net of cash and marketable securities.

Cisco and Acacia expect to complete the acquisition by the end of March. 

Photo: Cisco