Cisco To Acquire Acacia Communications For $2.6 Billion

Cisco revealed plans Tuesday to scoop up one of its suppliers, Acacia Communications, a manufacturer of optical interconnect products, for $2.6 billion, to boost its networking portfolio.

Networking behemoth Cisco Systems is about to get a little bigger.

Cisco announced plans on Tuesday to buy Acacia Communications, a manufacturer of optical interconnect products, for $70 per share in cash in a $2.6 billion deal on a fully diluted basis, the two companies said.

The deal will strengthen Cisco's innovation capabilities across software, silicon and optics, which will help the San Jose, Calif.-based giant continue to make networks smarter, simpler and more secure, Cisco executives said regarding the deal.

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Acacia and Cisco already have a relationship; Maynard, Mass.-based Acacia has been a Cisco supplier of its high-speed, optical interconnect technologies that help hyper-scale cloud and service providers, as well as data center operators -- two large customer segments for Cisco -- meet consumer demands for data.

The networking industry has benefited from the interconnection between routers, switches and optical systems, especially as silicon technology advances and boosts performance and capacity gains in routers and switches. That pace of innovation must continue, said Bill Gartner, senior vice president and general manager of Cisco's Optical Systems and Optics Group in a blog post published Tuesday.

"Acacia develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform communications networks through improvements in performance, capacity and cost," Gartner said. "Cisco is building an industry-leading portfolio of optical, silicon, and software technologies to advance our intent-based networking, and Acacia’s coherent optics technology will build on the strength of that portfolio."

The two companies expect the deal to close during the second half of Cisco’s fiscal 2020. Following the close, Acacia employees will become part of Cisco’s Optical Systems and Optics business, according to Cisco.

Acacia, a publicly-traded company, was up more than 34 percent Tuesday morning following news of the acquisition deal.