Keysight trumps Viavi's Spirent offer with £1.2bn bid

US-based Keysight's 201.5 pence per share bid – comprised of 199 pence in cash plus a special dividend of 2.5 pence per Spirent share – represents a 15.1 percent premium on the 175 pence offered by rival US testing specialist Viavi earlier this month.

The new bid values Spirent at around £1.16 billion, whereas Viavi's valued it at £1.01 billion.

"The Spirent directors consider that the acquisition represents a superior proposition for Spirent shareholders relative to the Viavi offer, with the acquisition value representing an increase of 26.5 pence per Spirent share relative to the Viavi offer," said a joint press release issued by Spirent. "Accordingly, the Spirent directors have unanimously withdrawn their recommendation of the Viavi offer and intend to adjourn the Viavi offer shareholder meetings."

Telecoms.com has contacted Viavi for its reaction and will update this story if it hears back.

Keysight, like Viavi and Spirent, offers test, assurance and automation solutions, so the rationale behind acquiring a rival on the opposite side of the Atlantic is obvious.

Keysight said it reckons the acquisition will give it access to an addressable market worth $1.5 billion.

"Keysight believes that, through being part of the Keysight Group, the Spirent Group will gain additional long-term customer relationships, additional deep industry expertise and increased global scale," the companies said.

The overlapping portfolios also hold the promise of significant synergies.

When Viavi made its offer, it shared an approximate target of $75 million per year around two years after the deal's completion.

No such target has been shared by Keysight as of yet, but it does anticipate "synergies will be realised primarily through synergies from the Keysight Group's SG&A (selling, general and administrative) infrastructure.

"Keysight anticipates that it can leverage its large global salesforce and extensive customer base to extend the reach of the Spirent Group's and the Keysight Group's combined portfolio of leading technologies and improve go to market efficiency."

Keysight's offer – like Viavi's – proposes an all-cash transaction funded by debt. In this case, the debt will be provided under a bridge facility agreement arranged by Citibank and BNP Paribas.

Normally, bridge financing is a short term measure companies can use for working capital until a long-term financing solution is in place. When bridge financing takes the form of debt, it usually comes with a higher-than-usual interest rate. That's not ideal in this economy, and not ideal for the company subject to an acquisition funded in this manner.

Keysight might just be taking its time to shop around for the best long-term financing option, or it might just have been in a rush because it wasn't necessarily planning to make a move on Spirent until its rival did.

Either way, it will be interesting to see what Keysight does if Viavi comes back with an improved offer of its own.