Spirent Communications, a London-listed company, has become the latest target for a takeover after its board backed a £1billion offer from an American competitor.
Viavi Solutions’ all-cash bid for the FTSE 250 tech group was a good outcome for investors, according to the group.
Viavi’s 175p offer represents a 61% premium to the company, which prompted Spirent shares to rise by 63.3 percent, or 68 1/2p to 177p.
As the economy improves, dealmaking in the City is picking up. UK stocks are considered undervalued when compared to international peers.
GXO is the American owner and operator of Clipper Logistics. They are interested in Wincanton. Currys, the electricals retailer is in the middle of a potential takeover battle between American hedge fund Elliott, and China’s JD.com. Direct Line, an insurer, rejected a £3.1billion offer from a Belgian competitor, calling it “highly opportunistic”.
Spirent, a technology company based in Crawley (West Sussex), tests, measures, and analyzes telecoms devices. Jack Bowthorpe founded Goodliffe Electric Supplies in London in 1936. In 1955, the company was listed as Bowthorpe Holdings, but changed its name to reflect a new focus on high-growth and high-margin businesses. The company has more than 1,500 employees, and it operates in over 50 countries.
Sir Bill Thomas said that the “all cash offer” recognises Spirent’s underlying value. Viavi, a New York-listed telecoms company, is partially funded by Silver Lake, an American private equity firm, with $400 million cash.
Graham Simpson, an analyst at Canaccord Genuity said that the US bid was “at one end of the range” of possible offers, and Viavi took advantage of Spirent’s profit warning in October. Simpson stated that the offer was not very generous, and was opportunistic because Spirent traded at 175p only nine months before issuing its profit warning in October.
The Spirent share performance and profit warning last year will have severely tested the patience of shareholders.
“Corporates will usually pay more because their goals are both growth and consolidation. The offer is not indicative of any improvement in Spirent’s business, which has been recovering. It feels more like an offer from a private equity firm disguised as corporate.
Spirent announced to investors in an announcement that the combined group would be able to deliver annual savings of up $75 million. However, these savings would not fall under the research and development divisions.
Viavi said in the announcement: “[Viavi] expects to achieve cost synergies through the elimination or decrease of functions and costs that have been historically related to Spirent’s status as an listed company, but will no longer need to be due to Spirent ceasing being a listed corporation.”
Viavi Solutions is expected to benefit from the deal by enhancing its expertise in areas such as artificial intelligence, machine learning, automation, cloud-native architecture, and security.