British telecoms testing services provider Spirent Communications has agreed to be acquired by US communications equipment firm Viavi in a deal valued at £1 billion, following a significant drop in profits.
As of Monday’s close, Spirent’s market capitalization stood at £626 million. Under the terms of the agreement, Viavi will purchase Spirent for 172.5p per share in cash, representing a substantial 61% premium to Spirent shares’ closing price of 108p on Monday. Additionally, the deal includes a special dividend of 2.5p per Spirent share, replacing any final dividend for 2023.
As part of the acquisition, US private equity firm Silver Lake is making a $400 million long-term strategic investment in Viavi.
The acquisition of Spirent is subject to approval by at least 75% of shareholders and the satisfaction of certain regulatory conditions, the company announced. Spirent anticipates that the scheme will become effective during the second half of 2024.
The news of the acquisition coincided with Spirent’s release of its full-year results for 2023. The company reported a pre-tax profit of $22.9 million (£18 million), marking an 80% decline from $114.6 million (£90.4 million) in 2022. Revenues also saw a significant decrease, falling to $474.3 million (£374 million) from $607.5 million (£479 million), with Spirent attributing the decline to “challenging market conditions.”
Meanwhile, Spirent’s adjusted operating profit for 2023 was $45.2 million (£36 million), down from $129.5 million (£102 million) in 2022 but in line with revised market consensus.
Sir Bill Thomas, Chair of Spirent, highlighted the company’s strengths amidst challenging market conditions, stating, “Spirent is a business with a differentiated value proposition, diversified portfolio of technology solutions, deep customer relationships, and talented people.” He expressed confidence in Viavi as the right owner to lead Spirent into its next phase of growth.
CEO Eric Updyke acknowledged the ongoing challenges posed by the macroeconomic environment and their impact on Spirent’s core end markets, noting that these challenges are likely to persist for some time.
Oleg Khaykin, President and CEO of Viavi, emphasized the strategic benefits of the acquisition, stating, “Combining our leading communications test and measurement and optical technologies with Spirent’s high-performance testing and assurance solutions is expected to deliver enhanced product solutions and applications, accelerate growth in new markets, and strengthen innovation through expanded engineering and design capabilities.”