• Viavi had struck a deal to acquire fellow test and measurement vendor Spirent for £1bn
• But Keysight Technologies has outdone its rival with an offer worth £1.16bn
• Spirent’s board wasted no time in recommending the deal to shareholders
• Might a bidding war ensue?

In a dramatic move that has turned the M&A spotlight onto the telecom test and measurement market, Keysight Technologies has outbid its vendor rival Viavi Solutions and secured an agreement to acquire Spirent Communications for £1.16bn, 15% more than the price Spirent agreed with Viavi in early March. 

Only four weeks ago, Viavi announced it was set to acquire Spirent for 175 pence per share, an offer that valued Spirent at £1bn. The companies noted that “Spirent’s product offerings and technological assets are highly complementary and synergistic to Viavi’s existing portfolio, which will enable the combined group to deliver high performance, integrated solutions for networking and mission critical applications, including 5G and 6G wireless infrastructure.” 

But that news clearly set alarm bells ringing at Keysight’s headquarters in Santa Rosa, California, where the thought of a stronger Viavi with a broader portfolio and expanded customer base sparked a reaction: Viavi currently generates annual revenues of around $1bn, while Spirent reported full year revenues for 2023 of $474.3m (down 22%). 

As a result, Keysight (a much bigger company with annual revenues of about $5.5bn) has offered Spirent’s investors 199 pence per share, which values Spirent at almost £1.16bn, plus a special dividend of 2.5 pence per share. 

Spirent’s board has agreed to the terms and the company’s directors have “unanimously withdrawn their recommendation of the Viavi offer,” the company noted in an announcement made to the London Stock Exchange (LSE). 

The news sent the value of Spirent’s stock up by 11.7% to 200 pence on the LSE, while Viavi’s share price dipped by 4% to $9.19 on the Nasdaq. Keysight’s share price hardly budged and was worth $155.95 on the Nasdaq as this article was published.    

Spirent’s announcement to investors about its support for Keysight’s higher offer highlights many synergies between the two companies and multiple reasons why the combination of Keysight and Spirent is so compelling, with much of it sounding very similar to the reasoning behind the Viavi acquisition. According to Spirent: “Next-generation communication networks including 5G-Advanced and 6G are becoming increasingly software based, driven by advances in cloud, automation and artificial intelligence and machine learning technologies. The need for real-time insights to manage and operate future communication networks is critical. The Spirent Group has valuable capabilities in software, cloud, and automation technologies. Keysight believes that with these capabilities, the combined group can provide a superior value proposition, delivering crucial network analytics in live network use cases, for hyperscalers, communication service providers and enterprise customers, and can provide better solutions to enable new and emerging applications, including private and industrial networks.” 

Spirent’s CEO, Eric Updyke, stated: “Keysight’s offer for Spirent will provide further opportunities for our employees and strengthens our customer offering, given Keysight’s technology expertise, capabilities and robust global platform with its breadth and depth of industry-leading solutions. Following my discussions with the Keysight management team, I am excited about the broader reach and expanded long-term prospects for Spirent arising from the combination with Keysight. The market environment remains challenging but with this strong strategic fit, bringing together our complementary services and solutions, we are confident in the opportunities this will bring for our stakeholders. Keysight has a strong track record of developing, strengthening and growing the businesses that it invests in and it shares our belief in the strengths of our people and our long-term vision for Spirent’s future. This, together with the strong set of intentions that it has set out today, gives the Spirent board confidence that Keysight will be a responsible, thoughtful and careful owner of Spirent, which is why we are recommending this offer.”

Let’s not forget that the higher bid will also mean a bigger pay day for Spirent’s senior executives, though such lining of pockets never gets mentioned in stock market announcements.   

Continuing the love-in, Satish Dhanasekaran, Keysight’s president and CEO, noted: “Spirent has a differentiated portfolio, which is a strong fit for Keysight. Both companies share a common focus on empowering and accelerating high-value solutions for customers. In Keysight, Spirent will join a platform of significant customer scale with the capacity to provide the necessary capital and resources to help Spirent grow and accelerate delivery of its strategic vision. Keysight’s long-term customer relationships, industry expertise and global reach will help Spirent drive product development and execute on its full potential. With similar cultures valuing customer-centricity and high-performance, we believe that Keysight will be an excellent home for Spirent to thrive and deliver sustainable, long-term growth. Our superior offer recognises the value of Spirent’s achievements to date and the exciting prospects of the combination of our complementary product portfolios to provide end-to-end solutions for customers across their lifecycle needs.”

The deal requires the approval of shareholders representing more than 75% of the company’s voting rights at a special court meeting and a general company meeting. If the deal is approved, it’s expected to close between November this year and the end of April 2025, which would mark the halfway point of Keysight’s next financial year. 

So there are many hurdles to be jumped still and, of course, there’s always the prospect that Viavi might return with an even better offer, while the current bidding war might attract other players, such as Rohde & Schwarz, into the M&A fray. 

Right now, though, Spirent’s shareholders are sitting pretty: A month ago the company’s stock was trading at 105 pence but the takeover interest from first Viavi and now Keysight has sent it shooting up by more than 90% in value in the past four weeks. 

- Ray Le Maistre, Editorial Director, TelecomTV