Cisco Systems today announced a definitive agreement to acquire privately held Andiamo Systems, a San Jose, CA based developer of intelligent storage switching products for the Storage Area Networking (SAN) market.
This acquisition represents Cisco’s entry into the Fibre Channel SAN switching market, which according to market research firm Gartner Group, is expected to grow from approximately $1.2 billion in 2002 to $4.3 billion in 2006. Cisco’s right to acquire Andiamo, and a summary of the transaction’s basic terms, were disclosed in Cisco’s 10-Q filed in March of this year.
In 2001, Cisco entered into agreements with Andiamo under which Cisco was granted the right to acquire Andiamo, as previously disclosed in Cisco’s recent 10-Q filings with the SEC. The agreement announced today represents Cisco’s exercise of this right.
When the acquisition closes, shares of Cisco common stock will be exchanged for all outstanding shares and options of Andiamo not already owned by Cisco. The transaction is expected to close in the third quarter of Cisco’s 2004 fiscal year (February to April 2004), but no later than July 31, 2004.
The purchase price to be paid by Cisco for the remaining equity interest in Andiamo at closing will be based primarily on the following factors: sales of Andiamo products by Cisco during a three month period shortly preceding the closing, and a multiple based on Cisco’s sales and market capitalisation.
Under its agreements with Andiamo, Cisco is the exclusive manufacturer and distributor of all Andiamo products. Cisco has a convertible note in Andiamo that is expected to represent approximately 44% of the equity of Andiamo at the closing of the acquisition. The purchase price could range from a net purchase price of $0 to approximately $2.5 billion, and will not be determined until shortly prior to closing.
The acquisition has received the required approvals from both companies and is subject to various closing conditions and approvals.