Spirent accepts £1bn takeover offer from US rival Viavi, shares rise 60%

Shares in British telecoms company Spirent Communications jumped 60% after it accepted a £1 billion takeover bid from a US rival, the latest takeover of a British company by a foreign company.

Arizona-based Viavi Solutions, which manufactures, tests and monitors network equipment, will pay 172.5p in cash and a special dividend of 2.5p per Spirent share in lieu of a final dividend.

Spirent’s share price rose as much as 174.90 pence, or 60%, becoming the largest increase in the FTSE 250 index.

Foreign buyers have made takeover bids for British companies, hoping to take advantage of low valuations. British assets are considered cheap due to a weak pound, a struggling British economy and the lingering impact of Brexit. Last week, bosses at transport company Wincanton backed a £762m takeover bid by US logistics firm GXO and dropped their support for a rival takeover bid by France’s CEVA. CEVA said on Tuesday it would not raise its offer.

Insurer Direct Line has rejected a £3.1bn bid from Belgian rival Ageas, describing it as “highly opportunistic”. Electrical goods chain Currys has rejected an improved takeover bid worth £742m from US investment group Elliott Advisors.

Figures released by the Office for National Statistics on Tuesday showed that the value of foreign acquisitions of British companies increased to 8.6 billion pounds in the fourth quarter from 5.3 billion pounds in the previous quarter.

News of the Spirent takeover came as the Crawley-based company, which employs 1,500 people, reported an 80% fall in pre-tax profits in 2023 to $22.9m (£18.1m). Revenue fell 22% to $474 million.

Spirent CEO Eric Updike said high interest rates and inflationary pressures have affected customers in the telecom industry, cutting costs and slashing capital spending.

The deal is expected to drive the combined group’s product development in the areas of artificial intelligence and machine learning, security, cloud-native architecture and automation.

As part of the deal, private equity group Silver Lake will invest $400 million in Viavi.

Nasdaq-listed Viavi has a market capitalization of $2.2 billion and has 3,600 employees, 400 of whom are in the UK. Its customers include Cisco Systems, Nokia, BT Openreach, Deutsche Telekom and Verizon Communications.

Richard Hunter, head of markets at trading platform Interactive Investor, said Spirent was “yet another example of UK companies being targeted for bids given the current low valuation levels, which has led to recent A variety of acquisition methods emerged during the week.”

“Yet another tech company is in trouble,” said Neil Wilson, chief market analyst at Final Financial Services.

“This move will only reinforce the sense that the London market is shallow enough for tech companies to thrive. If the Chancellor is serious about supporting London markets and the City as a whole, he will have a lot to think about ahead of tomorrow’s Budget. Canceling 0.5% A stamp duty reserve tax would be a start; but what is really needed are pro-growth, pro-investment institutional changes.”