What happened
Shares of Splunk (SPLK +0.00%) were up 21.3% as of 1:10 p.m. ET Thursday after the data analytics and observability specialist agreed to be acquired by Cisco Systems (CSCO 0.05%).
NASDAQ: SPLK
Key Data Points
So what
More specifically, on Thursday morning Splunk announced it has entered into a definitive agreement under which Cisco will acquire the company for $157 per share in cash -- a roughly 31% premium from Wednesday's closing price. The deal places an equity value on Splunk of approximately $28 billion.
"We're excited to bring Cisco and Splunk together," said Cisco CEO Chuck Robbins in a statement. "Our combined capabilities will drive the next generation of AI-enabled security and observability."
Splunk, for its part, was already up nearly 40% year to date leading into the announcement, helped by a post-earnings pop last month after the company delivered significantly stronger-than-expected fiscal second-quarter results. At the time, Splunk CEO Gary Steele highlighted his company's focus on accelerating innovation as a key beneficiary of the rise of artificial intelligence stocks.
Now what
The acquisition has already been unanimously approved by both companies' boards of directors, but still requires the approval of regulators and Splunk shareholders. Assuming all goes as planned, the transaction should close by the end of the third quarter of calendar year 2024. Cisco believes the purchase should be cash-flow-positive and gross margin accretive in the first fiscal year post close, and accretive to non-GAAP (adjusted) earnings per share in the second year.
As of this writing, Splunk stock is trading at a modest 7.7% discount to the agreed purchase price. So given the cash nature of the deal -- and unless waiting longer to sell might qualify you for long-term capital gains tax rates on your profits -- I think most Splunk shareholders would do well to take their money and put it to work in any number of other promising stocks.
