Splunk soars as Cisco agrees to buy the AI-focused cybersecurity firm at a big premium

Splunk Inc (NASDAQ:SPLK) stock jumped more than 20% in Thursday's early deals after the cybersecurity and data firm announced it is to be bought by Cisco Systems (NASDAQ:CSCO) in a cash deal pitched at a big premium valuation.

Cisco has agreed to pay Splunk shareholders $157 per share, versus Wednesday’s closing price of $119.59.

The offer values Splunk at $28 billion.

"We're excited to bring Cisco and Splunk together,” Cisco chief executive Chuck Robbins said in a statement.

“Our combined capabilities will drive the next generation of AI-enabled security and observability."

The deal is expected to boost Cisco’s recurring revenue base, whilst better positioning the new company for AI-related growth factors.

Cisco told investors the deal would be cash flow positive and gross margin accretive in its first fiscal year, accelerating revenue growth and expanding margin.

"Together, we will form a global security and observability leader that harnesses the power of data and AI to deliver excellent customer outcomes and transform the industry,” Splunk chief executive Gary Steele said.

“We're thrilled to join forces with a long-time and trusted partner that shares our passion for innovation and world-class customer experience, and we expect our community of Splunk employees will benefit from even greater opportunities as we bring together two respected and purpose-driven organizations."

In today’s joint statement, the companies highlighted: “In today's hyperconnected world, data is everywhere, with every organization relying on it to run their business and make mission-critical decisions every day.

“Factoring in the acceleration and adoption of generative AI, expanding threat surfaces, and multiple cloud environments, it creates a level of complexity that is unlike anything organizations have faced.”

The combined company will “address these challenges head on”, the statement added.

It noted that the transaction is unanimously approved by the boards of directors of both companies and is expected to close by the end of the third quarter of calendar year 2024.