Cisco Systems will buy U.S. telecommunications software company BroadSoft in a deal valued at $1.9 billion, as the world’s largest networking gear producer shifts from its stagnating legacy business of switches and routers.
Cisco (CSCO) said on Monday it offered $55 per share, which represents a premium of 2% to BroadSoft’s last close.
BroadSoft (BSFT) shares were up 1.5% before the bell, while Cisco shares were up marginally.
The deal, which comes after Reuters reported on Sunday that the companies were in talks, will give Cisco a stronger foothold in selling unified communications software to big telecommunications firms.
The equity value of the deal is $1.71 billion, based on 31 million shares outstanding, according to Thomson Reuters data.
The deal is expected to close during the first quarter of 2018, the companies said in a statement.
Upon completion of the deal, BroadSoft employees will join Cisco’s unified communications technology group.
BroadSoft provides software and services that enable mobile, fixed-line and cable service providers to offer unified communications over their internet protocol networks.
Cisco, like other legacy technology firms, has been focusing on high-growth areas such as security, the Internet of things, and cloud computing.
BroadSoft has historically sold its products to large telecommunications companies such as Verizon Communications (VZ) and AT&T (T), which then resell the software to their business customers.
The BroadSoft deal is the company’s second major acquisition this year following the $3.7 billion acquisition of privately-held AppDynamics in March.