Cisco (CSCO) is rounding up $28 billion on Splunk to help protect enterprise data in the fast-moving generative AI era, and it has no fears that the Federal Reserve keeping interest rates higher for longer will lower the returns on the new monster deal.
“I don’t think so,” Cisco CFO Scott Herren told Yahoo Finance Live when asked if the potential for another rate hike from Fed was a worry in doing the deal. “As I talk to my peers, CFOs at other companies, I think we are all monitoring the environment. It’s time to be prudent. But they are not stopping. They are not shutting down business. By the way, you can’t ever time what’s going to come with the FOMC. I would never try to do that.”
Herren noted the Fed has not yet caused a “significant” economic slowdown.
On Thursday, Cisco finally executed its long-rumored deal for security player Splunk. Cisco is valuing Splunk at $28 billion or $157 a share, a 31% premium to Wednesday’s closing price.
The company will fund the transaction via a mix of cash and new debt.
“The strategic combination of Splunk’s leading SIEM solution to predict and prevent threats with Cisco’s broad security portfolio that focuses on detection and response does make sense to us,” Guggenheim analyst John DiFucci said in a client note.
Herren told Yahoo Finance Live that Cisco has no plans to halt its stock buyback plan and sees “synergies” — mostly on revenue — between the two businesses.
No approval for the deal is needed by the Chinese government given Splunk’s “small” business in the country, Herren said.
The deal is slated to close within nine to 12 months.
Splunk stock rose 21% to $144.85, while Cisco’s stock dropped over 3%.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email firstname.lastname@example.org.
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