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Cisco to Acquire Splunk for $28B, Shares Fall 4.2% Premarket

Tim Fries

Published: September 21, 2023 6:55 am

Last Updated: September 21, 2023 10:50 am

Cisco announced it has agreed to buy out the cybersecurity service provider Splunk at $157 per share in cash, bringing the deal’s total value to $28 billion. Cisco’s shares fell over 4.2% in the market pre-open.

With Splunk, Cisco Expects to Drive the Next-Gen of AI Security

Digital communications giant Cisco announced on Thursday it has reached an agreement to acquire cybersecurity firm Splunk in a $28 billion cash deal, valuing the company at $157 per share. According to the press release, the move represents a part of Cisco’s broader strategy to improve the security systems of its clients and make them less vulnerable to potential threats.

“From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient.”

– Chuck Robbins, Chair and CEO of Cisco said in a statement.

Robbins added that merging Cisco and Splunk’s capabilities is expected to “drive the next generation of AI-enabled security and observability.”

The company believes the deal will be cash flow positive and expects gross margins to increase in the first year following the closing of the takeover. Furthermore, it added that the acquisition will be accretive to Cisco’s non-GAAP earnings per share by the second year.

Cisco’s Shares Fall in Premarket, Trading of Splunk Halted

At the time of publication, Cisco’s shares were down more than 4.2% in premarket trading Thursday following the deal’s announcement. Meanwhile, trading of Splunk’s stock has been halted.

Remarkably, Cisco’s offer of $157 per share represents a premium of around 31% to Splunk’s latest closing price of $119.5. The cybersecurity firm witnessed a notable ascent in 2023, with its share price surging nearly 40% year-to-date.

Upon the deal’s closing, Splunk’s current President and CEO, Gary Steel, will join Cisco’s executive leadership team and report to Robbins. The acquisition is expected to close by the end of Q3 2024, subject to regulatory approvals.

If Cisco abandons the deal or gets forced to do so due to regulatory issues, the tech company will have to pay a termination fee to Splunk of $1.48 billion. On the other hand, if Splunk backs out for any reason, it will pay Cisco a $1 billion breakup fee.

Editorial Update (21st September 2023, 9:27 AM EST): Shares of Splunk have resumed trading and up 20.45% in premarket at the time of writing.

This article originally appeared on The Tokenist