Tandberg Shareholders Ask Cisco for More

I don’t know the Norwegian phrases for “no deal” or “we want more,” but I would imagine they were invoked frequently by restive Tandberg shareholders during the past couple weeks.

In a previous post, I wrote that a significant minority of Tandberg shareholders were dissatisfied with Cisco’s $3-billion-plus acquisition proposal and might consider holding out for a better offer.

In the end, though, I didn’t think the shareholders would push that particular envelope. In my view, no other company will emerge as a white night. Cisco appears to be the only vendor that has the means, motivation, and opportunity to acquire Tandberg for more than $3 billion.

Still, the shareholders were upset. They ran their numbers and concluded that Cisco wasn’t paying a sufficient premium — Cisco’s offer was 11 percent above Tandberg’s closing share price the day before the acquisition was announced — and that the networking giant hadn’t considered the full synergistic value Tandberg represented.

Today we learned that Tandberg shareholders, with more than 24 percent of the company’s stock, rejected Cisco’s recent $3 billion offer for the market-leading vendor of videoconferencing systems. They want more from Cisco — or from anybody else, really. (The Cisco acquisition was and is conditional on an acceptance rate of 90 percent of Tandberg shares.)

Swedish brokerage SEB Enskilda, which represents 21 shareholders in the Norwegian company, had this to say:

“The shareholders are convinced that Tandberg will generate strong returns as an independent company, but are open to evaluate a higher offer from Cisco or a third party.”

SEB Enskilda spokesman Nils Kasper Lodden, as reported by Bloomberg, elaborated further:

“Our agenda is all the time to help our clients to generate more returns. The shareholder structure in Tandberg is extremely fragmented. Many of the shareholders weren’t very happy with how the value creation from a combination of Tandberg and Cisco was divided between the two parties.”

Even though Cisco has argued that its offer was “fair” — endorsed by Tandberg’s board of directors — some market analysts believe Cisco might be willing to raise the offer enough to placate the dissident shareholders. Many believe the recalcitrant shareholders will not push too hard or too high, that they probably can be satisfied with a relatively modest increase on the initial offer.

Others, including Mark Sue of RBC Capital Markets, were skeptical of the shareholder uprising, suggesting that it didn’t signify an auspicious start to a potentially long-term relationship between the two companies.

Regardless of who’s right, Cisco probably remains the only high roller at Tandberg’s videoconferencing table. As I said before, with no other competing bid in sight, Tandberg’s shareholders will have to deal with Cisco or do no deal at all.

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