Viavi acquires 'complementary' testing company Spirent for $1.3B

Viavi has grand plans to acquire fellow testing and measurement company Spirent for £1 billion (US$1.26 billion). Omdia's James Crawshaw said this deal appears to be a good fit for Viavi as Spirent is more of a "complementary" acquisition than its previous attempt to bring on EXFO.

US-based Viavi has been looking to expand via acquisition for quite some time after its efforts to bring on EXFO fell through, Crawshaw, practice leader for research firm Omdia, told Light Reading. With the acquisition of UK-based Spirent, Viavi "has settled on a company that is possibly more complementary and less of a direct competitor," said Crawshaw.

Spirent's testing focus is more on positioning, navigation and timing technologies (PNT), he added. Viavi has historically been more focused on the optical technology space, including optical network testing and fiber-optic monitoring solutions.

"There is some overlap so there will inevitably be more restructuring but Spirent was already cutting headcount so arguably being part of a larger entity will provide more stability for staff longer term," said Crawshaw.

While Spirent's board is recommending the deal to its shareholders, the company "has published results today for the year ending December 2023 that show order intake for the year down 24% and revenue down 22% (previously announced in Jan)," noted Crawshaw in a LinkedIn post. Inflation, challenging macroeconomic conditions, layoffs and adjustments in customers spending are impacting the financial health of the broader telecom industry.

"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," said Sir Bill Thomas, chairman of Spirent, in a statement.

As part of the acquisition, Viavi will borrow $800 million from Wells Fargo Bank. Private equity group Silver Lake is contributing a long-term strategic investment of $400 million in Viavi in connection with the acquisition. Viavi also has a $100 million five-year revolving credit facility from Wells Fargo Bank for "additional financial flexibility."

Silver Lake invests heavily in optical networking components, computing and enterprise software. The VC firm has made billions from its investments in Dell during the 2010s and helped start Avago, the company that eventually bought Broadcom.

Ken Hao, chairman and a managing partner of Silver Lake, will join Viavi's board. Hao is also on the board at Broadcom, Splunk and SolarWinds.

Per the terms of the acquisition, Spirent's shareholders will receive 172.5 pence ($2.19) per Spirent share in cash (the acquisition price).

Viavi expects the acquisition to result in annual run-rate (ARR) cost synergies of up to $75 million within two years of the close of the deal.

Subject to approvals, the acquisition is set to close in the second half of the year.