Starent Settles Lawsuits Blocking Cisco Purchase

Starent Networks has removed at least some of the legal hurdles in the way of Cisco Systems’ efforts to buy the company.

Starent on 27 November settled a class action lawsuit that was filed by shareholders unhappy with the proposed $2.9 billion (£1.8bn) acquisition by Cisco, which was announced on 13 October.

The suit, which was filed by Laborers Local 235 Benefit Funds in federal court in Delaware soon after the deal was announced, sought to block the sale, with the shareholders claiming the Cisco bid was too low and that investors were not given enough information on the offer.

According to a Starent statement, the agreement needs to be accepted by the Delaware court. Officials with Starent, which makes wireless infrastructure equipment, said in the statement that they do not believe the company has done anything wrong, but agreed to the settlement to avoid a costly legal battle.

In accordance with the deal, Starent will make more information available to shareholders in exchange for the lawsuit being dropped.

Not all of the legal challenges to the deal are gone, however. There still is at least one other shareholder suit, filed in U.S. District Court in Boston by an Illinois investor, claiming that the bid by Cisco is too low.

Cisco is looking to expand its capabilities in the mobile Internet space by buying Starent, which makes products designed for wireless service providers such as AT&T and Verizon. With the number of smartphones and other Web-connected devices in use by consumers and businesses rapidly increasing, the mobile Internet is becoming an important area for companies like Cisco, Nokia and Alcatel-Lucent.

Cisco is predicting that global mobile data traffic will more than double every year through at least 2013.

The Starent deal is the latest acquisition attempt by Cisco in 2009, following such purchases as Flip video camera maker Pure Digital in May for about $590 million and its current $3.4 billion bid for Norwegian video conferencing company Tandberg.