Cisco Systems (NASDAQ:CSCO) said it would acquire supplier of mobile-infrastructure products Starent Networks (NASDAQ:STAR), for $2.9 billion as it sees strong growth in demand for high-speed wireless service.
Under the terms of the agreement, Cisco will pay $35 per share in cash (a 24% premium to Starent closing price of $29.03 a share at the close yesterday, Oct. 12) in exchange for each share of Starent Networks. The co.’s stock has been on an upward climb since November.
Starent, which went public in 2007, has about 1,000 employees world-wide. The Tewksbury, Mass.-based company reported $254.1 million revenue in 2008, up 74% from the prior year.
“We are very pleased that Starent Networks will be joining the Cisco team..” John Chambers, Chairman and CEO of Cisco said in a statement.
The acquisition, which is the second major one for Cisco after the purchase of Norway based video conferencing equipment maker Tandberg ASA for $3 billion, has been approved by the boards of directors of both companies.
The top U.S. network equipment maker, Cisco said the acquisition would probably hurt its bottom line for several years, and it expects the transaction to cut into profit the next two.
Upon completion of the deal, Starent is to become the Mobile Internet Technology Group within Cisco’s service-provider business. The new group is to be led by Starent Chief Executive Ashraf Dahod.