By Dave Sebastian

Acacia Communications Inc. is scrapping a plan to sell itself to Cisco Systems Inc. for roughly $2.6 billion, though the networking-equipment giant is aiming to muscle its way to completing the deal.

Cisco agreed to buy Acacia, a maker of optical interconnect technologies such as modules and semiconductors, in July 2019 for $70 a share in cash. The San Jose, Calif.-based company said Acacia's technology would enable users of its hardware such as data-center operators and telecom-service providers to drive more data over high-speed internet networks.

On Friday, Acacia said the deal hadn't received the Chinese government's approval of the combination within the prescribed time frame, a claim Cisco disputes. The Maynard, Mass.-based company said that it has the right to walk away from the transaction and that it wouldn't be eligible for a $120 million deal-termination payment from Cisco.

Cisco, meanwhile, said the purchase has received approval in China, noting that its submission to regulators was "sufficient to address the relevant competition concerns." The company said it is seeking Delaware Chancery Court confirmation that it met all conditions for the combination and for a court to order Acacia to close the deal.

Acacia shares rose more than 12% in Friday trading, while Cisco shares were up slightly. Acacia derived 15% of its revenue for the first nine months of 2020 from Cisco, the company has said in securities filings.

Cisco was among companies expected to face scrutiny from Chinese government agencies as part of a potential blacklist used to punish U.S. technology firms in response to Washington's restrictions on telecom giant Huawei Technologies Co., The Wall Street Journal reported in September.

The company, which competes with Huawei, already has lost contracts to supply some of its long-term Chinese customers, such as China's large state-owned telecom carriers.

Smartphone chip maker Qualcomm Inc.'s scrapped a planned $44 billion acquisition of Dutch chip maker NXP Semiconductors NV in 2018 after a deadline to gain approval from Chinese regulators passed. Other big tech deals are up for regulatory scrutiny there, including Nvidia Corp's. plan to buy chip-design company Arm from SoftBank Group Corp. British antitrust regulators this week said they were reviewing the proposed acquisition.

Cisco has gobbled up firms in the optics space such as Lightwire Inc., CoreOptics Inc. and Luxtera Inc. in recent years. The Acacia acquisition would have been Cisco's biggest since 2017.

Cisco's business has been hampered as companies cut back on purchases of networking equipment during the Covid-19 pandemic. For the quarter ended Oct. 24, Cisco's revenue fell 9% from a year earlier, while its profit declined 26%.

Meanwhile Acacia posted a 61% increase in profit for the quarter ended September on a 32% rise in revenue, driven by sales of embedded modules.

Write to Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

01-08-21 1210ET