Viavi Mulls Reviving Counter Bid for Spirent: Stock to Gain?
Per a Reuters report, Viavi Solutions Inc. VIAV is mulling to revive its counterbid for acquiring Spirent Communications plc SPMYY if Keysight Technologies, Inc. KEYS fails to get the requisite regulator approval for the buyout. The proceedings are reportedly at a nascent stage, and company spokespersons of all the related firms have declined to comment on the turn of events.
VIAV-SPMYY Deal: A Flashback
In March 2024, Viavi inked an agreement to acquire Spirent for approximately $1.3 billion, with Spirent Shareholders receiving 172.5 pence per SPMYY share in cash along with a special dividend of 2.5 pence per share. With Viavi's expertise in communications test, measurement and optical technologies and Spirent's prowess in automated test and assurance solutions, the merger promised to create a powerhouse in the sector. The combined entity would have offered comprehensive solutions for research and development labs, service providers, data centers and mission-critical infrastructure.
The combined entity was poised to capitalize on emerging trends such as 5G, 6G+ and cybersecurity, positioning itself as a leader in the evolving landscape of telecommunications technology. The acquisition was expected to yield significant operational efficiencies, with anticipated cost synergies of up to $75 million annually within two years of completion. Viavi had then planned to leverage its financial resources, including existing cash and committed financing, to fund the transaction and drive long-term growth.
VIAV Deal Falls Flat With KEYS Rival Bid
Following Viavi’s buyout offer, Keysight made a counteroffer to acquire Spirent for 201.5 pence per share, inclusive of a 2.5 pence special dividend, leading to a valuation of approximately $1.5 billion. The higher bid by Keysight forced Spirent’s board to retract their earlier endorsement of Viavi’s bid.
The acquisition was perceived to be in tune with Keysight’s long-term software-centric solutions strategy. With complementary businesses, the combined entity was expected to provide end-to-end solutions for customers across their lifecycle needs.
Why VIAV Envisions a Second Chance
Spirent shares are currently trading at more than a 15% discount to Keysight's 201.50 pence offer price on the London Stock Exchange. This has led to some concerns over Keysight's ability to get the regulator’s approval for the deal. This, in turn, has opened a slight window of opportunity for Viavi to submit a probable second bid for Spirent. However, Viavi needs to get the U.K. regulator’s approval for submitting another bid, as the local takeover rules debar it from doing so within 12 months.
Will VIAV Stock Benefit From the Buyout?
The 5G transition is expected to be disruptive, creating new avenues for industries across the board. 5G is likely to augment the scalability, security and universal mobility of the telecommunications industry, which is expected to propel the wide proliferation of IoT. The telecom firms are facilitating their customers to move away from an economy-of-scale network operating model to demand-driven operations and seamlessly migrate to 5G by offering easy programmability and flexible automation.
The convergence of network technologies requires significant investments from both traditional carriers (telecom and cable) and cloud service providers. Viavi’s solutions are well-positioned to meet these rapidly changing industry trends, given its technology prowess, product depth and wide customer base. The buyout is further expected to strengthen its market position and drive long-term growth with incremental revenues and operational synergies, boosting its shares.
VIAV Zacks Rank & A Key Pick
Viavi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A leading company operating within this space is AudioCodes Ltd. AUDC, which currently carries a Zacks Rank #2 (Buy). It has delivered an earnings surprise of 10.1%, on average, in the trailing four quarters.
Headquartered in Lod, Israel, AudioCodes offers advanced communications software, products and productivity solutions for the digital workplace. It provides a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
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AudioCodes Ltd. (AUDC) : Free Stock Analysis Report
Spirent Communications PLC (SPMYY) : Free Stock Analysis Report
Keysight Technologies Inc. (KEYS) : Free Stock Analysis Report
Viavi Solutions Inc. (VIAV) : Free Stock Analysis Report