Two European financial firms argue that Cisco's $3 billion bid for video conferencing rival Tandberg is too low considering its performance and stock price. The opposition from Panta Capital and Scott & Associates comes three days before Cisco's Nov. 9 deadline on the deal, and joins stockholders with about 30 percent of Tandberg shares in saying the bid is too low. Cisco officials have called the offer fair.
Cisco Systems is seeing growing resistance to its $3 billion bid for video
conferencing systems vendor Tandberg.
Panta Capital, a London-based financial firm that represents some Tandberg
shareholders, and Scott & Associates, a Swiss firm, have both said the
offer Cisco is making for Tandberg is too low.
In an open letter to
Cisco posted on Panta's Website Nov. 6, the two firms question why Cisco
officials use Tandberg's closing stock price of July 15 as the comparison point
for the $3 billion bid, which the networking giant announced Oct. 1. Cisco
officials have said they used the July date because it was when speculation
about Cisco buying Tandberg first began circulating, and 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 risen
significantly between July 15 and Oct. 1, a reflection of business strength
beyond the takeover rumors.
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 video conferencing is a
key part of the $34 billion collaboration market opportunity envisioned by
Cisco officials, and that Tandberg could see its revenues grow faster as part
of Cisco, the $3 billion is too low an offer, the letter 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 said.
The "principles of prudence and fairness" refers to a Nov. 2 blog
post by Ned Hooper, Cisco's chief
strategy officer, who argued that while Cisco stands 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 Nov. 9 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 eventually Cisco will 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.
Investors that hold about 30 percent of Tandberg's stock already have said
they will not vote for the deal, preferring instead to seek a higher bid from
Cisco or another company or to keep Tandberg independent.
During a conference call to announce Cisco's quarterly earnings Nov. 4, CEO
John Chambers expressed confidence that the deal will be done, but also said Cisco
didn't have to have Tandberg to make its video conferencing push.
What Cisco really stands to gain by acquiring Tandberg is an expanded
customer base and products that already are established in the small and
midsize business space. Cisco's TelePresence technology has strong adoption
rates in enterprises.