Viavi considers reviving rival bid for Spirent

U.S. IT communications specialist Viavi Solutions is considering whether it could make another bid for telecoms testing group Spirent Communications if a takeover by its rival Keysight Technologies fails, sources familiar with the matter said.

Keysight outbid Viavi in March with an all-cash offer valuing Spirent at $1.5 billion, in a deal which is now in the process of being approved.

But Spirent shares are trading at a 14.5% discount to Keysight’s 201.50 pence offer price, which some analysts say reflects concern over the bidder’s ability to get competition approval, said two people, who spoke on condition of anonymity.

Viavi would have to get consent from UK takeover regulator to make another bid as UK takeover rules prevent it from doing so for 12 months from when its previous offer lapsed in May.

Viavi, Keysight and Spirent declined to comment.

At the time of its bid, Keysight’s offer represented a premium of 85.9% to London-listed Spirent’s closing price of 108.4 pence on March 4, well above Viavi’s 61.4% premium.

Keysight has said it expects its takeover of Spirent, which would combine “complementary” products and lead to “strategic” synergies, to be approved before the end of April next year.

Spirent said in August that both it and Keysight were working with U.S. and European authorities to gain anti-trust approval in expectation of the deal closing before then too.

Keysight signed a co-operation agreement which includes a ‘Hell-or-High-Water’ commitment to support efforts to secure regulatory approval.

Viavi in its original offer said that relative to Keysight it had “limited business overlap with Spirent”, and that its rival’s proposed combination would limit customer choice.

Regulators could object to the tie-up as it could lead to Keysight controlling more than 80% of the high-speed-ethernet (HSE) telecoms testing market, said analysts.

Both companies also overlap in other products areas around security and navigation and analysts have said Keysight may be required to sell assets to win regulatory approval.

A third person with knowledge of the matter said the deal with Keysight is moving along as Spirent expects and it would consider disposals, including of its ethernet testing business.

This is part of Spirent’s Networking & Security unit, which its results show represents more than 55% of its revenue.

The third person said that the discount in Spirent’s share price reflects a broader trend among deals which are facing increased regulatory scrutiny.

Spirent’s results in August also show its revenue slipped by 12% to $197.3 million in the first half of 2024, hit by a lack of customer spending due to an economic slowdown that it expects to continue into the second half.

Customer hesitation after the news of the takeover has also delayed contracts, the company said.