Spirent Comms’ Shares Rallied 11.7% on Keysight Takeover News

The Spirent Communications Plc (LON: SPT) share price rallied 11.7% after Keysight Technologies, a U.S.-based company listed on the New York Stock Exchange, decided to disrupt an existing £1 billion acquisition agreement for Spirent Communications, a firm specialising in cybersecurity. 

According to Sky News, Keysight Technologies is gearing up to present a formal bid for Spirent. It proposes a value of approximately 200 pence per share, placing the FTSE 250-listed company's valuation at around £1.15 billion.

This move would eclipse the previous offer from Viavi Solutions, another American technology firm that proposed 175 pence per share last month, valuing Spirent at a lower figure. Viavi's bid was supported by a $400 million financial infusion from Silver Lake Partners, a notable private equity entity with investments in various companies, including the owner of Manchester City Football Club.

An investor with a stake in the company anticipates that Keysight's more generous offer might convince Spirent's board to favour their bid over Viavi's. Spirent Communications, which began in 1936 and was formerly known as Bowthorpe, has established its reputation in testing 5G and WiFi networks, mainly serving the telecommunications industry. The company, headquartered in Crawley, employs around 1,500 people.

The competition between Keysight and Viavi for Spirent brings to the forefront discussions about the valuation of UK companies on the equity market, especially considering the growth potential. Factors such as the UK's slow economic pace and a depreciating pound have made British firms particularly appealing targets for American acquirers.

Before the announcement, Viavi's initial offer exceeded 60% of Spirent's stock price. In comparison, Keysight's proposed bid signifies a near 90% increase, marking a significant premium by recent London stock market standards.

Despite some Spirent shareholders ready to support Viavi's offer, there remains a sentiment that the bid was opportunistic and that a higher proposal could emerge. It's still uncertain whether Viavi will counter with a raised offer following Keysight's entry.

The potential takeover is part of a broader trend of UK firms being targeted by foreign companies. Examples from this year include Wincanton and International Paper's interest in DS Smith and previous interests in companies like Currys and Direct Line Group, although those discussions did not lead to acquisitions.

Spirent Communications share price. 

The Spirent Communications share price rallied 11.68% to trade at 199.30p from Wednesday’s closing price of 178.45p.