Opposition Mounts To Cisco’s Tandberg Bid

Cisco Systems is encountering growing opposition to its $3 billion (£1.8 billion) bid for video conferencing systems rival Tandberg.

Panta Capital, a London-based financial firm that represents some Tandberg shareholders, and Scott & Associates, a Swiss firm, both said Cisco’s offer for Tandberg is too low.

In an open letter to Cisco posted on Panta’s website, the two firms question why Cisco officials use Tandberg’s closing stock price of 15 July as the comparison point for the $3 billion bid, which the networking giant announced in early October.

Cisco officials have said they used the July date because it was when speculation around Cisco buying Tandberg first began circulating, and thus have argued that the $3 billion represents a 38.3 percent premium over the stock price of that day.

However, Panta and Scott said Tandberg had been talked about as a takeover target for the past 18 months by not only Cisco but others, including Silver Lake Partners. They also argued that Cisco had not taken into account the fact that the stock prices of both Tandberg and its rival, PolyCom, had both risen significantly between 15 July and 1 October (when it made its bid), a reflection of business strength beyond the takeover rumours.

Cisco has not taken into account historical trading value, peer valuation and operational performance, the two firms said.

In addition, given that Cisco officials have said that video conferencing is a key part of the $34 billion (£21 billion) collaboration market opportunity expressed by Cisco officials, and that Tandberg could see its revenues grow faster as part of Cisco, the $3 billion is too low an offer, they said.

“We believe that a higher, more appropriate price for the acquisition of Tandberg, taking into account its growth profile and the substantial scope for sales and cost synergies, is not in conflict with Cisco’s respect of the principles of prudence and financial fairness,” the letter states.

The “principles of prudence and fairness” refers to a recent blog post by Ned Hooper, Cisco’s chief strategy officer, who argued that while Cisco stood to benefit from buying Tandberg, there are risks involved for Cisco. Given those risks, $3 billion is a fair price for Tandberg, Hooper said, adding that Cisco has a history of strong financial returns from the companies it buys, and that “Cisco will always act with fiscal prudence.”

Cisco has set a 9 November deadline on the offer, and has said it needs 90 percent of shareholders to approve the deal before it moves forward. Analysts have predicted that Cisco will eventually increase its offer, though there also has been speculation that the company will walk away from the deal, which already has the backing of Tandberg’s board of directors.