Viavi Solutions is likely to renew its bid for telecom equipment testing firm Spirent if the current takeover attempt by Keysight Technologies faces regulatory hurdles, according to a Reuters report.
Keysight outbid Viavi in March with a $1.5 billion all-cash offer for Spirent, which is undergoing approval.
Despite the ongoing approval process, Spirent shares are trading at a 14.5 percent discount to Keysight’s offer price of 201.50 pence per share. Analysts suggest that this discount reflects concerns about Keysight’s ability to obtain competition approval from regulatory bodies.
Viavi, whose earlier bid was blocked in May, would require special consent from the UK takeover regulator to re-enter the bidding process. Under UK takeover rules, Viavi is prohibited from making another bid within 12 months unless permitted by the regulator. In its original offer, Viavi emphasized its limited business overlap with Spirent, as opposed to Keysight, which it argued would reduce customer choice in the market.
The regulatory concerns primarily revolve around Keysight’s potential dominance in the high-speed ethernet (HSE) telecoms testing sector, where it could control over 80 percent of the market. Both companies also overlap in other product areas such as security and navigation, raising further anti-trust concerns.
Keysight has pledged a “Hell-or-High-Water” commitment, aiming to do whatever it takes to gain regulatory approval, including possible divestitures. Spirent, which generates over 55 percent of its revenue from its Networking & Security unit, has indicated that it may be open to asset sales to help smooth the deal.
Spirent’s financial performance, impacted by reduced customer spending due to the global economic slowdown, saw revenue fall by 12 percent to $197.3 million in the first half of 2024. Spirent expects the downturn to persist through the second half of the year.
Customer hesitation following the takeover news has also caused delays in contract signings. Spirent’s order book fell 6 percent to $284.2 million in H1 2024.
Meanwhile, Viavi Solutions reported revenue of $1,000.4 million (down 9.6 percent) with operating margin of 57.6 percent during the fiscal year ended June 29, 2024.
Keysight’s bid, which represented an 85.9 percent premium on Spirent’s March 4 share price, is expected to close by April 2025, subject to U.S. and European regulatory approvals. However, Viavi remains a potential bidder should the Keysight deal stumble.
