Cisco raises bid for Tandberg to $3.4 billion

updated 12:37 p.m. ET Nov. 16, 2009

NEW YORK - Cisco Systems Inc. said Monday it raised its bid for Norway's Tandberg ASA, the world's largest provider of videoconferencing equipment for business users, after only a fraction of Tandberg shareholders agreed to Cisco's initial offer.

Cisco increased its bid to 170 kroner ($30.46) per share from its earlier offer of 153.5 kroner, valuing Tandberg at $3.4 billion. The previous offer was worth $3 billion.

The Norwegian company's board approved the original deal, but as the offer period approached its Wednesday deadline, shareholders had offered up less than 10 percent of Tandberg shares. Shareholders now have until Dec. 1 to accept.

Cisco said 40 percent of Tandberg's shareholders backed the new offer, including its largest minority shareholders — Folketrygdfondet, Norway's domestic pension fund, and OppenheimerFunds.

The new bid represents Cisco's "final price," it said, adding that if it doesn't get enough acceptances, it will withdraw its bid altogether.

UBS analyst Nikos Theodosopoulos said the raised bid was unexpected and sets a bad precedent for future deals. The raised bid may encourage shareholders of future acquisition targets to hold out as well.

Cisco is a prolific acquirer and usually takes care to make the deals very consistent, Theodosopoulos wrote. However, the bid for Tandberg represents a new structure for Cisco, as it's the company's first acquisition of an overseas public company.

Cisco, the world's largest maker of computer networking equipment, has been focusing on the high end of the videoconferencing market, selling so-called "TelePresence" systems with multiple plasma screens that present life-size images of the participants to provide the illusion of face-to-face communication.

With Tandberg, Cisco gets the leading maker of video systems that range from small "videophones" to full conference-room setups.

Cisco also lets the company spend some of the cash that has been piling up in its overseas subsidiaries. By buying an international company, Cisco is avoiding the U.S. taxes it would have to pay to bring the money home.

Tandberg shares rose 3.5 percent to close at 163.20 Norwegian kroner in Oslo.

Cisco shares rose 28 cents, or 1.2 percent, to $23.99 in midday trading Monday.

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