Bucking a generally gloomy day for the stock market in general and growth stocks in particular, Splunk (SPLK 0.62%) shot more than 9% higher on Monday. That was entirely expected, as a Wall Street Journal article reported that the company received a massive buyout offer from a peer.
After market hours on Friday, the Journal published a report saying that networking tech specialist Cisco Systems (CSCO 0.69%) has made an unsolicited buyout offer for Splunk. Citing "people familiar with the matter," the business newspaper said that the offered price topped $20 billion. That would represent a premium of at least 10% on Splunk's latest closing stock price.
Although it is a frequent acquirer of complementary assets, Cisco has never attempted an acquisition of this scale. Its priciest asset buy was of Scientific Atlanta in 2005 for around $7 billion.
Neither Splunk nor Cisco has officially commented on the story.
The scuttlebutt comes less than a month after the tech industry's latest mega-deal announcement: Microsoft's nearly $70 billion purchase of Activision Blizzard. Large acquisitions tend to inspire other deals. Additionally, many tech companies are enjoying record-high share prices and large stockpiles of cash, both of which can be readily deployed for asset buys.
Both Cisco and Splunk have had their struggles lately, and it's not obvious how combining two rather disparate businesses would help them significantly.
Meanwhile, according to the Journal article, it's not apparent whether other companies are also vying to buy Splunk, or if Cisco's is an isolated offer. As it's early days for any potential deal, investors in both companies might be best served by adopting a wait-and-see-what-develops stance.