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Picking up the pieces after Cisco finally gets its hands on Tandberg

Cisco finally managed to win over enough of Tandberg’s shareholders to complete its takeover of the enterprise video company. Cisco had stipulated that it would only move ahead with the acquisition if it could gain 90% of Tandberg’s stock, apparently because Norwegian law requires all shareholders to sell once 90% of the shares have been voluntarily sold to a buyer.

  • Why was this deal so hard for Cisco to close? Answer: It’s complicated. Reuters’ DealTalk has a nice rundown on the confluence of complicated factors that nearly scuttled this deal. For one thing, there were cultural issues. Apparently Scandinavian investors (Tandberg is a Norwegian company) are not bashful about kicking up a fuss when they feel aggrieved. And Cisco might have overplayed its hand by talking up the so-called synergies and business opportunities that a combined Cisco-Tandberg would enjoy. This talk may have prompted the holdout shareholders to demand more money. On the other hand, Peter Germonpre of Panta Capital told Reuters that Cisco may have been clever and low-balled Tandberg early on in an effort to keep the final price low.  Also, many Tandberg shareholders were reluctant to give up their shares because they like the diversity in their stock portfolio that a successful local tech company represents. Folketrygdfondet, a Norwegian company that manages the the investments of the government’s employee pension funds, was a major holdout. Pension fund investors love diversity.
  • The U.S. Justice Department is now looking at the Cisco-Tandberg transaction from an antitrust perspective. I’m not sure that this investigation will go anywhere. Cisco’s videoconferencing business was limited to the very high end with its Telepresence products. Yes, it has bought a telepresence competitor, but Tandberg is not a telepresence company. It is an enterprise video company. There were two major players in enterprise video before this deal (Tandberg and Polycom) and there are two major players in the market after this deal (Cisco and Polycom).
  • A tax shelter for Cisco? As the New York Times Dealbook blog notes, Cisco has piles of cash sitting overseas with its international subsidiaries. Dealbook says that by buying Tandberg, Cisco gets to avoid paying taxes on the $3.4 billion it spent in the deal. I’m not a tax lawyer, so I don’t know how it works. But avoiding paying taxes on $3.4 billion seems like a good deal for Cisco, not so much for the U.S. Treasury.

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