Thumbing its nose at dissident shareholders, the management of videoconferencing provider TANDBERG has released a (supposedly independent) report by consulting and accounting firm Ernst & Young that deems the takeover offer from Cisco (CSCO) “fair.”
“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,” the Ernst & Young report dutifully concluded.
The $3 billion purchase of TANDBERG by the networking giant, which would produce a dominant player in the growing videoconferencing sector, has been held up by a group representing about one-quarter of Tandberg’s shareholders who claim that the offer is too low. According to the laws of Norway, TANDBERG’s home country, the purchase cannot go through without the approval of 90 percent of shareholders.
“We strongly believe our offer is a very good price for TANDBERG shareholders,” countered Cisco executive Ned Hooper on the company’s blog today. “As TANDBERG noted in its own communications to the Oslo Exchange, Cisco’s offer represents a 38.3 percent premium to the closing share price on July 15 — which is one day prior to major media reports of a possible transaction. The price also represents a 102 percent 12 month return for TANDBERG shareholders, far surpassing global market index returns.
The impasse has given rise to rumors over the last week that Cisco might walk away from the deal. Those reports, in turn, have fueled speculation that Cisco’s U.S. rival Polycom might be an alternate takeover target.
Shares in Polycom, which lost almost 4.5 percent of their value on initial news of the Cisco-Tandberg deal, spiked last Friday when it seemed that the purchase might fall apart. Polycom, which is trying to compete with Cisco in the room-sized telepresence market, could be forced by a TANDBERG-Cisco merger to focus more on competing at the desktop level, where it has partnered with Microsoft (MSFT) to launch a new videoconferencing device that leverages Microsoft’s Office Communications Server 2007 and Live Meeting Service.