VIAVI Solutions (a leading provider of communications test, measurement, and optical technologies) and Spirent Communications plc (a global provider of automated test and assurance solutions for networks, cybersecurity, and positioning) announced an agreement on the terms of a cash offer for Spirent, which the Spirent Board intends to recommend unanimously. The deal price values Spirent at about £1.005 billion (or $1.28 billion based on the British pound sterling to U.S. dollar exchange rate on March 4, 2024).
Under the terms of the deal, Spirent Shareholders will receive 172.5 pence per Spirent share in cash. And Spirent Shareholders will also receive a special dividend of 2.5 pence per Spirent share in lieu of a final dividend for the year ended December 31, 2023.
The deal is expected to close during the second half of 2024, subject to shareholder approvals and other customary closing conditions, including Spirent Shareholder approval and certain regulatory closing approvals. Spirent Directors who hold shares of Spirent have signed irrevocable agreements in support of the Acquisition.
Spirent offers products, services, and managed solutions that address the test, assurance, and automation challenges of technologies, including 5G, software-defined wide area networks (SD-WAN), cloud, and autonomous vehicles. And Spirent’s international positioning, navigation and timing business also addresses customers’ needs in research and development, verification and integration testing, including the testing of hybrid positioning and sensor fusion under real-world conditions. The Spirent strategy is built on three pillars: customer-centricity, innovation for growth, and operational excellence. And Spirent is executing this strategy to develop its offerings into live networks further, increasing its recurring revenue streams and providing value-added services and solutions across the product portfolio.
VIAVI believes there is a compelling strategic and financial rationale for the deal as it is expected to:
1.) Create a leading provider of test, assurance, and security solutions for research and development labs, service providers, data centers, and mission-critical infrastructure
2.) Merging complementary product portfolios and services will enable the combined group to deliver solutions for various markets and applications.
3.) The combination of VIAVI and Spirent’s current and future product offerings will position the combined group to bring to market innovative solutions across fast-growing cloud service providers, enterprise/IT networks, 5G private networks, 6G+, positioning, navigation, and timing verticals.
4.) VIAVI believes that building on the combined expertise of the engineering, research and development, and design teams of VIAVI and Spirent will result in greater engineering, research and development, and design capabilities to accelerate new technology development and product innovation in AI/ML, security, cloud-native architecture, and automation.
5.) The combined group will benefit from additional financial and operational resources to continue its research and development leadership and deliver products to new verticals to help customers solve their most difficult challenges.
6.) Operational efficiencies anticipated to result in annual run-rate cost synergies of up to $75 million approximately two years after the completion of the Acquisition.
7.) VIAVI anticipates utilizing its US net operating losses to lower the combined group’s blended non-GAAP tax rate.
8.) VIAVI will prioritize debt paydown utilizing free cash flow generation after the completion of the Acquisition to lower leverage ratios towards 4x gross and 3x net over the long term.
The deal will be funded by VIAVI’s existing cash, a fully committed $800 million 7-year term loan from Wells Fargo Bank, N.A. and a $400 million investment from Silver Lake in the form of a fully committed senior convertible note. In connection with the Silver Lake investment, Ken Hao, Chairman and a Managing Partner of Silver Lake will join the VIAVI Board of Directors. And VIAVI obtained a $100 million 5-year revolving credit facility (unfunded at close), committed by Wells Fargo Bank, N.A., to provide additional financial flexibility.
Qatalyst Partners is serving as lead financial advisor to VIAVI and Bidco, and Wells Fargo Securities is serving as financial advisor to VIAVI and Bidco. And Fried, Frank, Harris, Shriver & Jacobson LLP is serving as legal advisor to VIAVI and Bidco. Rothschild & Co is serving as financial advisor and UBS and Jefferies are serving as financial advisor and corporate broker to Spirent. Linklaters LLP is serving as its legal advisor.
KEY QUOTES:
“The Spirent Board intends to unanimously recommend this all-cash offer, which not only represents an attractive outcome for Spirent Shareholders, but also provides a significant opportunity for employees, customers and other stakeholders through what is a highly strategic and highly complementary combination. With its strong management team, global scale and the cultural alignment between our businesses, we are confident that in VIAVI, we have found the right owner to take Spirent on to the next phase of its growth story.”
- Sir Bill Thomas, Chairman of Spirent
“Combining with VIAVI brings together a highly complementary product offering which can be marketed globally. It will enable Spirent to build on the strategic progress we have made to date, with a partner that has the scale and resources to capitalize on the long-term growth opportunities ahead. The combination of VIAVI and Spirent creates a stronger business that will be better able to compete, and we are confident in the opportunities this will bring for our stakeholders.”
- Eric Updyke, Chief Executive Officer of Spirent
“VIAVI is proud to help enable its global customers to pursue innovation across the wide range of industries it serves. Combining our leading communications test and measurement and optical technologies and Spirent’s high-performance testing and assurance solutions is expected to deliver enhanced product solutions and applications, accelerate growth in new markets and strengthen innovation through expanded engineering and design capabilities. Further, we are uniting two teams with a shared passion for developing compelling and cutting-edge offerings for customers and a commitment to technological excellence. We are pleased to welcome a strategic, long-term investment from Silver Lake in connection with the Acquisition. Silver Lake has an outstanding track record of supporting leading technology companies through both organic growth investments and scale acquisitions.”
- Oleg Khaykin, President and CEO of VIAVI
