Shares of mobile infrastructure equipment maker Starent Networks (Nasdaq: STAR) soared nearly 19 percent in morning trading after telecommunications giant Cisco Systems, Inc. (Nasdaq: CSCO) announced it would acquire Starent for $2.9 billion to strengthen its high-speed wireless services business. Cisco will pay a 20 percent premium, or $35 a share in cash for Starent.

The deal is expected to close in the first half of CY2010. Cisco anticipates the acquisition will hurt earnings for fiscal years 2010 and 2011, but believes it will add to its bottom line in fiscal 2012.

Starent Networks marks the second multi-billion dollar deal for Cisco in less than three weeks. It follows the company’s Oct. 1 announcement that it plans to buy video conferencing equipment maker Tandberg for $3 billion.

“We are very pleased that Starent Networks will be joining the Cisco team, and we believe their products and engineering talent will greatly benefit our Service Provider customers as they build out their Mobile Internet offerings,” said Cisco Chief Executive Officer John Chambers in a statement.

Starent makes network equipment that fits between the radio access network and the core network of mobile phone service providers that include Sprint and Verizon Wireless. Cisco said there was some overlap in their products, but that their offerings would for most part be complementary.

After the deal closes, Starent will become part of Cisco’s service provider business, but as a new Mobile Internet Technology Group, headed by current Starent CEO Ashraf Dahod, who stands to gain substantially from the acquisition. As of Starent’s proxy filing in January, Dahod owned 6.9 million shares. At Cisco’s proposed price of $35 a share, Dahod’s stake would be worth approximately $241 million today.

The acquisition of Starent has raised some red flags and is currently being investigated by Levi & Korsinsky, LLP, for possible breaches of fiduciary duty and other violations of state law. For the year ending December 31, 2008, the Company reported revenues of $254,076,000 and net income of $60,524,000 as compared to revenues of $145,797,000 and net income of $5,485,000 for the year ended December 31, 2007.

The investigation looks into whether Starent’s Board of Directors breached their fiduciary duties to Starent shareholders by agreeing to sell the Company at an unfair price.