Spirent Communications to be taken over by Viavi in £1bn deal

(Sharecast News) - Spirent Communications said on Tuesday that it has agreed to be taken over by US communications equipment company Viavi in a £1bn deal, as it revealed a slump in profits. Under the terms of the acquisition, Viavi will pay 175p a share. This includes 172.5p in cash and a special dividend of 2.5p per share, in lieu of any final dividend for the year to the end of December 2023.

The price represents a premium of around 61.4% to the closing Spirent share price on Monday.

Spirent chairman Sir Bill Thomas said: "Spirent is a business with a differentiated value proposition, diversified portfolio of technology solutions, deep customer relationships and talented people. Despite these strengths, we recognise that the Spirent Group has been operating against an increasingly challenging market backdrop.

"Having considered in great detail the interests of all Spirent shareholders and Spirent as a whole, the Spirent board believes that this all-cash offer recognises the underlying value of Spirent. That is why we intend to unanimously recommend this cash offer, which not only represents an attractive outcome for our investors, but also provides a significant opportunity for employees, customers and other stakeholders through what is a highly strategic and highly complementary combination."

At 1355 GMT, the shares were up 62% at 175.76p.

Neil Wilson, chief market analyst at Finalto, said: "The move just adds to the sense that the shallow waters of the London market are not enough for tech firms to thrive."

News of the takeover came alongside Spirent's results for the year to 31 December 2023, which showed that adjusted pre-tax profit fell 62.2% to $49.7m, while reported pre-tax profit slid 80% to $22.9m. Revenue declined 21.9% to $474.3m and order intake was 23.8% lower at $477m amid "challenging market conditions".

Chief executive Eric Updyke said: "As we progressed through 2023, the market landscape became increasingly challenging. The elevated prevailing interest rates and inflationary pressures impacted customers, especially those in the telecommunications sector. These customers responded by taking significant action, particularly in the second half of 2023, to cut costs and by reducing their capital expenditure to preserve cash."

Updyke said the "current challenges" for the telecoms industry are expected to continue and it is difficult to predict how long they will last.

"Whilst we continue to believe the mid to longer term drivers for our business remain intact, as announced separately today, the board has concluded that the offer from Viavi should be recommended to shareholders given the value it places on our business," he said.