What happened

Shares of optical networking company Acacia Communications (NASDAQ:ACIA) soared on Thursday after the drama related to its acquisition by Cisco Systems (NASDAQ:CSCO) ended with an amended merger agreement at a substantially higher price. Shares of Acacia were up about 32.5% at 12:45 p.m. EST today, while shares of Cisco were essentially unchanged.

So what

Acacia announced on Jan. 8 that it was terminating its merger agreement with Cisco due to not having received regulatory approval from China by the deadline. Cisco sued to block that move and force Acacia to close the deal, saying that China had in fact approved it.

A drawing of a fish eating a smaller fish.

Image source: Getty Images.

Cisco first announced the acquisition of Acacia in July of 2019. Under the original arrangement, Cisco would pay Acacia shareholders $70 per share, which worked out to about $2.6 billion in total.

It seems that Cisco has blinked first. The company announced on Thursday that it had agreed to pay Acacia shareholders $115 per share, or $4.5 billion total, in an amended agreement. Cisco may have avoided a protracted court battle by agreeing to the higher price tag.

Now what

The acquisition is now expected to be complete by the end of the first quarter of 2021, with CEO Raj Shanmugaraj and all Acacia employees joining Cisco's optics business. "I am delighted that Cisco and Acacia have decided to come together in this mutual deal," Cisco CEO Chuck Robbins said.

I'm guessing Cisco is not actually delighted about paying a much higher price for Acacia than it originally agreed to, but it appears the company was anxious enough to close the deal that it was willing to throw in an extra couple of billion dollars. That equates to a nice payday for Acacia investors.

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