M&A

2 November, 2009

UPDATE 3-Cisco defends Tandberg bid as "very good price"

* Cisco says its $3 bln offer is "a very good price"

* Cisco says will act with fiscal prudence

* Ernst & Young says terms are fair (Adds comments from Cisco exec, NEW YORK dateline, byline)

By Wojciech Moskwa and Ritsuko Ando

OSLO/NEW YORK, Nov 2 (Reuters) - Cisco Systems Inc (CSCO.O) said its $3 billion offer for video conferencing company Tandberg ASA (TAA.OL) is "a very good price," defending the bid after some Tandberg shareholders demanded more money.

Investors holding 24 percent of shares of Tandberg had snubbed Cisco's bid last month, hoping they could force the top U.S. network equipment maker to offer more.

But Ned Hooper, senior vice president and chief strategy officer at Cisco, said on Monday that the bid reflects the potential value of the deal as well as the risks involved in trying to integrate a European public company into the San Jose, California-based Cisco.

"The bottom line is that Cisco will always act with fiscal prudence," he said in the company's blog.

Hooper said the deal would make sense as the shift to online video communications will require investment and innovation. But he added that "no acquisition should be pursued or completed if it runs counter to the broader principles of prudence and financial fairness."

His comments followed a report by Ernst & Young -- commissioned by Tandberg in line with the Norwegian practice for external consultants to evaluate takeover bids -- that the offer was fair. [ID:nLF527811]

"It is of our opinion that the terms of the offer are fair from a financial point of view, so far as the shareholders of Tandberg are concerned," Ernst & Young said in the report.

Such consultancy reports do not often hold much sway with investors but can be more significant as courtroom ammunition should a takeover end up in a legal battle.

A person familiar with the matter told Reuters last week that Cisco Systems was mulling various options, including withdrawing its bid or raising it, after a group of Tandberg shareholders looked set to block the deal unless its terms were sweetened. [ID:nLU639058]

Many analysts expect Cisco to raise its bid, as acquiring the market leader in video conferencing would accelerate its push in selling video equipment and software.

Cisco's current video offerings include a high-end TelePresence video meeting service for executives as well as WebEx online meeting software.

But UBS analyst Nikos Theodosopoulos said he does not expect Cisco to offer more.

"We doubt Cisco will raise its bid as it would set a bad precedent for the company," he said.

Tandberg shares, which for weeks have been trading above or close to Cisco's 153.50 crown-per-share-offer, fell 1.43 percent to 151.50 crowns, against a 0.19 percent gain in Oslo's main index .OSEBX. Cisco shares were unchanged from last Friday at $22.81, with some investors holding their bets ahead of Wednesday's quarterly earnings announcement.

The takeover, which would need approval from 90 percent of Tandberg shareholders, has been approved by Tandberg's board. (Additional reporting by Richard Solem, Editing by David Holmes and Gerald E. McCormick)

Source: http://www.reuters.com