OSLO/NEW YORK 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.
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.
Some analysts pointed to Cisco's announcement this week to buy wireless equipment maker Starent Networks (STAR.O) at almost 40 times Starent's 2010 earnings estimates, a multiple Cisco has not paid since it bought WebEx in 2007.
But analyst Tory Jensen of Piper Jaffray said he does not expect Cisco to raise its bid, noting there were no rival bidders and that Cisco could opt to buy Polycom or Lifesize, another videoconferencing company, instead.
"There's been speculation Cisco's looked at other videoconference names in the space so Tandberg shareholders better be careful not to upset Cisco and change the direction of who they want to acquire," Jensen said.
Some said Cisco might opt to acquire a smaller stake in Tandberg instead.
Conglomerate Orkla (ORK.OL), which holds 2.2 percent of Tandberg's stock and has earlier been seen as an activist shareholder in Norway, declined to say if it was part of the shareholder group or give comments on the bid.
One banker noted Nordic shareholders have succeeded in recent years at wringing better terms out of suitors, pointing to Ericsson (ERICb.ST) trumping a bid from Arris Group (ARRS.O) to buy Norway's Tandberg Television in 2007. Swedish healthcare company Capio was acquired in 2006 after a private equity group lifted an original offer by 9 percent.