You can't always get what you want. Even mighty Cisco Systems (Nasdaq: CSCO ) doesn't automatically get every shareholder on board for a major acquisition.
Twenty-one major shareholders in Norwegian videoconferencing firm Tandberg have issued a joint statement, saying "thanks, but no thanks!" to Cisco's $3 billion buyout offer. The cadre of protesters is open to a Cisco deal, but wants more money. The Norwegian market reacted by sending Tandberg's share price up to just more than Cisco's offer price.
Analysts on both sides of the Atlantic think that Cisco probably will raise its offer to row this boat ashore -- no other company stands to gain as much as Cisco from Tandberg's products, and Cisco is actually in the habit of paying steeper buyout premiums than what it offered to Tandberg. For example, Cisco bought online collaboration expert WebEx for $3 billion a couple of years ago, paying around 40 times forward earnings. The Tandberg offer is only about 23 times next year's projected earnings.
Nobody believes in an outright bidding war here. Videoconferencing giants who could afford to top Cisco's $3 billion bid, such as Hewlett-Packard (NYSE: HPQ ) , Microsoft (Nasdaq: MSFT ) , or IBM (NYSE: IBM ) , haven't shown much interest in the TelePresence video-conferencing market. The only direct rival to Tandberg and Cisco's own TelePresence products would be small-cap Rule Breakers recommendation Polycom (Nasdaq: PLCM ) -- and with a $2.2 billion market cap today, a Tandberg deal would be more like a merger of equals for Polycom.
This buyout may not be of the same magnitude as the pending Oracle (Nasdaq: ORCL ) and Sun Microsystems (Nasdaq: JAVA ) combination, but Cisco believes in TelePresence and seems ready to invest in this technology. The Tandberg naysayers hold 24% of the company's shares, and Cisco needs a 90% majority in order to buy the company outright. Expect a higher bid, maybe 10% higher than Cisco’s current offer, before the curtains are drawn on this romance. And I'd still think Cisco is getting a pretty good deal.
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