Cisco has agreed to buy BroadSoft for about US$1.9bn to expand further into software and cloud services.
The $55/share cash offer announced Monday is a 28% premium over BroadSoft’s closing price on 29 August, a day before Reuters reported that the Gaithersburg, Maryland-based company was working with bankers to pursue a possible sale. The acquisition is expected to close during the first quarter of 2018, Cisco said.
Cisco has had an acquisitive year as CEO Chuck Robbins adapts to a shift in the networking industry toward less expensive software-based services and away from traditional hardware, which provides Cisco with most of its revenue. The San Jose, California-based company had announced eight acquisitions in 2017 before today’s deal, according to data compiled by Bloomberg.
BroadSoft, which had a market value of about $1.7bn based on Friday’s close, earlier attracted interest from buyout firms Searchlight Capital Partners and Siris Capital Group, people familiar with the matter said 4 October.
BroadSoft was advised on the transaction by Jefferies Group and Qatalyst Partners, with legal advice from Cooley.
The deal gives Cisco a major new presence in cloud-based communications products and services, a segment of the market it has been lacking in until now, said Jason Noah Ader, an analyst at William Blair & Co. Cisco already is a leading provider of communications for companies, but BroadSoft’s business is focused on providing those services through the Internet and hosting them in the cloud.
“Cisco has been a little bit behind the curve there,” Ader said. Buying BroadSoft “allows them to be a leader in the cloud instead of a challenger”.
BroadSoft operates in about 80 countries, according to its website. Founded in 1998 by former Alcatel USA vice president Michael Tessler and Celcore executive Scott Hoffpauir, the company went public in 2010. Tessler serves as CEO.
Cisco paid $3.7bn to acquire AppDynamics in March and in May, it agreed to buy software-based networking startup Viptela for $610m. — Reported by Ed Hammond, Ian King and Gerrit De Vynck, with assistance from Kiel Porter and Nabila Ahmed, (c) 2017 Bloomberg LP