(Bloomberg) -- Cisco Systems Inc. won a temporary court order blocking Acacia Communications Inc. from abandoning a planned merger between the two companies.
Networking giant Cisco announced in July 2019 that it had reached a deal to acquire Acacia, an optical component maker, for about $2.6 billion, saying the merger would help it capture a bigger chunk of spending on 5G telecommunications networks. Acacia said in a statement Friday that it was free to terminate the deal because it didn’t receive Chinese regulatory approval within the time-frame of the merger agreement.
Cisco sued Maynard, Massachusetts-based Acacia in Delaware Chancery Court on Friday. After a hearing Chancellor J. Travis Laster granted Cisco’s request for a restraining order and to expedite the proceedings.
William Lafferty, a lawyer for Cisco, said during the hearing that Acacia was trying to exit the deal because it believed its valuation had increased since entering into the agreement and hoped to negotiate a more generous offer.
“It has every motivation to walk away and terminate the deal that it has struck and that is what is ultimately driving this,” Lafferty said. On the other hand, for Cisco, “the termination or loss of a unique strategic merger like this one is a classic case of irreparable harm,” he argued.
Read More: Cisco Systems Sues to Stop Acacia From Ending Merger
Acacia’s decision to walk away from the deal reinforces Cisco’s challenges in navigating China’s regulators amid the U.S.-China trade dispute, Bloomberg Intelligence analyst Woo Jin Ho wrote.
Cisco said in a separate statement that it’s seeking confirmation from the judge that it has indeed met “all conditions for closing” the deal. The company said it was notified Thursday by China’s State Administration for Market Regulation that its submission was “sufficient to address the relevant competition concerns.”
Cisco shares climbed less than 0.5% Friday to $45.06 in New York trading. Acacia shares rose $7.15, or 9.8%, to $79.60.
(Updates with detail from the hearing)
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