Large Tandberg shareholder group snubs Cisco bid

By Richard Solem and Ritsuko Ando

OSLO/NEW YORK (Reuters) - Investors holding 24 percent of shares in videoconferencing firm Tandberg (TAA.OL) snubbed a $3 billion bid from Cisco Systems Inc (CSCO.O), hoping they could force the U.S. network equipment maker to offer more money.

Some analysts said Cisco has plenty of cash and could sweeten its bid to get the 90 percent shareholder approval it needs, but others believed it would play hardball given that no other bidders have emerged for Tandberg.

The group of 21 shareholders in the Norwegian company said in a statement that Cisco's 153.50 crowns-per-share offer ($27.61) was inadequate, although they did not suggest another price.

"We think the price is too low," said Amund Lunde, chief executive of life insurance group Oslo Pensjonsforsikring, a shareholder with 1 percent of Tandberg's stock and among the group of shareholders refusing Cisco.

Brokerage SEB Enskilda said in a statement that shareholders were convinced Tandberg will generate "strong returns as an independent company," though they are open to evaluating a higher offer from Cisco or another company.

Investors were cautious about betting on a much higher bid, sending Tandberg shares just 1.9 percent higher to 155.50 crowns. The main Oslo index .OSEBX was down 0.2 percent.

Analyst Tore Tonseth in Argo Securities said Tandberg shares could drop to 120-130 crowns if Cisco walked away.

Cisco declined to comment on the shareholders' move, but repeated its previous statement that it is offering "a fair price" and its bid has been recommended by Tandberg's board.

The one-month tender period for Tandberg shareholders began on October 9, and Cisco needs acceptances from at least 90 percent of shareholders to acquire the company.

Cisco's offer values Tandberg at about 23 times next year's projected earnings, slightly above U.S. rival Polycom's (PLCM.O) multiple of 21.7. The market premium Cisco offered was only 11 percent, but then Tandberg's shares had already risen sharply in recent months on takeover speculation.

DOMINATING VIDEOCONFERENCING

Some analysts said Cisco may be willing to pay more to dominate the fast-growing videoconferencing market, where it currently competes with Hewlett-Packard Co (HPQ.N) and others.

"We believe it is not unthinkable that Cisco will pay up to 170 crowns per share," said Fredrik Thoresen in DnB NOR Markets.

William Blair & Co. analyst Jason Ader said Cisco had presented the bid as such a highly strategic deal that it was unlikely to abandon it. "Walking away now would be contradictory and puzzling to Cisco shareholders, especially given Cisco's huge cash reserves," he said.

Cisco ended its last quarter with $33.6 billion in cash, cash equivalents and investments. The company's shares fell 0.86 percent to $24.17 in early Thursday trade.