Cisco sparks M&A speculation with $4bn debt package

Cisco has gone to the debt market to raise $4 billion, prompting speculation that it is ready to launch M&A raids on US companies.

The $4 billion debt package will be sold in two equal parts. The first will mature in 2019 and incur annual interest of 4.95%. The second will mature in 2039 and bear interest of 5.90% per annum.

The move is on the surface surprising because the company likes to boast that it has $30 billion cash on hand, more than any other tech company, says New York Times, which compiled a list of possible merger targets.

But most of that cash - around $26 billion - is overseas, limiting Cisco's ability to mount mergers in the US.

Analysts have speculated that the company will use the cash to acquire companies which can bolster its push into either the consumer or server markets. Financial Times reported that Cisco has recently expressed an interested in consumer video, virtualization software, cloud computing and data center technology.

Cisco has announced that it will use $500 million of the proceeds to repay floating rate notes, but has not yet commented on where the rest of the money will go.

Cisco shares fell 4.75% to $16.05 following the announcement.