Cisco To Acquire Splunk, Stock Shoots Higher

Cisco Systems, Inc CSCO agreed to acquire Splunk Inc SPLK for $157 per share in cash, representing approximately $28 billion in equity value, triggering a rally in Splunk's stock prices. Meanwhile, Cisco stock prices fell.

The purchase price implies a premium of 31.3% on Splunk's September 20 closing of $119.59.

The transaction will likely be cash flow positive and gross margin accretive in the first fiscal year post-close and non-GAAP EPS accretive in year two. 

Additionally, it will accelerate Cisco's revenue growth and gross margin expansion.

Upon the close of the acquisition, Splunk CEO Gary Steele will join Cisco's Executive Leadership Team, reporting to Chair and CEO Chuck Robbins.

"Our combined capabilities will drive the next generation of AI-enabled security and observability," said Chuck Robbins, chair and CEO of Cisco. "From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient."

The transaction will likely close by the end of the third quarter of calendar year 2024, subject to regulatory approval and other customary closing conditions.

Cisco held $26.1 billion in cash and equivalents as of July 29.

In August, Splunk reported quarterly earnings of 71 cents per share, which beat the consensus of 45 cents. The company reported quarterly sales of $910.59 million, up 14% year-on-year, which beat the consensus of $885.97 million.

Price Actions: SPLK shares traded higher by 21.6% at $145.42 premarket on the last check Thursday. CSCO shares traded lower by 4.86% at $52.80.