What happened

Shares of optical networking technology company Acacia Communications (NASDAQ:ACIA) soared on Tuesday, rising about 36% as of 2:00 p.m. EST.

The stock jumped following news that networking giant Cisco Systems (NASDAQ:CSCO) announced plans to acquire Acacia. 

A chart showing a stock price moving higher

Image source: Getty Images.

So what

Cisco entered into a definitive agreement with Acacia on Tuesday to acquire the company for $70 per share in cash. The deal values Acacia at $2.6 billion. Since Acacia shares were trading at about $48 on Monday, a jump in the stock price today makes sense. After the stock's 36% gain on Tuesday, shares are now trading above $65 -- closer to the planned $70 acquisition price.

Now what

"The acquisition of Acacia will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers' most demanding requirements," said David Goeckeler, Cisco's vice president and general manager of its networking and security business, in a press release on Tuesday.

The acquisition, of course, is subject to customer closing conditions and regulatory approval. The deal is expected to close sometime during the second half of Cisco's fiscal year of 2020 (the company is currently in its fourth quarter of fiscal 2019).

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