In brief: Cisco has agreed to purchase cybersecurity specialist Splunk as part of a deal valued at approximately $28 billion. Cisco will pay $157 per share in cash for Splunk, a 31.3 percent premium over the company's closing price of $119.59 at the end of business on Wednesday. The total equates to around 10 percent of Cisco's market cap and represents the company's largest acquisition to date.
Share value in Splunk is up more than 21 percent on the news, while Cisco shares are trading down about five percent as of this writing.
In a joint press release, the two companies said the acquisition builds on Splunk's history of helping organizations enhance their digital resilience. Furthermore, it will accelerate Cisco's strategy to "securely connect everything to make anything possible."
Chuck Robbins, chair and CEO of Cisco, said their combined capabilities will help pave the way for the next generation of AI-enabled security and observability. "From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient," Robbins added.
Joining forces with Cisco represents the next phase of Splunk's growth journey, said president and CEO Gary Steele. "Together, we will form a global security and observability leader that harnesses the power of data and AI to deliver excellent customer outcomes and transform the industry," the executive added.
The deal has already been unanimously approved by both boards. Should everything go according to plan, the deal is expected to close near the end of the third quarter of calendar year 2024. Once finalized, Steele will join Cisco's executive leadership team and report directly to Cisco boss Chuck Robbins. The combined company is expected to be cash flow positive and gross margin accretive in first fiscal year post close.
Should Cisco back out of the deal (say, due to regulatory pushback), they will have to pay Splunk a termination fee of $1.48 billion according to a filing with the SEC. Conversely, if Splunk pulls out, Cisco will receive a breakup fee of $1 billion.
Cisco has been on an acquisition spree as of late. Nine companies are listed on its corporate acquisition list for 2023 and that does not include Splunk. Most appear to be small start-ups but still, that's a lot of activity.
Image credit: David Paul Morris