Viavi probably won't get EXFO, and that may be OK

Exfo's board said a merger with Viavi 'is not capable of being completed.' But one financial analyst firm said Viavi's prospects in the sector, even without an acquisition of Exfo, remain undimmed.

Mike Dano, Editorial Director, 5G & Mobile Strategies

June 17, 2021

2 Min Read
Viavi probably won't get EXFO, and that may be OK

Shortly after Exfo's founder and majority shareholder rejected Viavi's latest acquisition offer, the company's board said they too have no plans to pursue a merger with Exfo's rival in the network test and measurement sector.

"It is not capable of being completed," Exfo's board of directors said Thursday in a statement pertaining to Viavi's $430 million offer to purchase Exfo.

But, according to one financial analyst firm, that rejection doesn't dim Viavi's future.

"We do not think a merger is likely," wrote the analysts at WestPark Capital in a note to investors Thursday. "However, we appreciate that Viavi management is actively looking for ways to further consolidate market share, drive synergies and monetize NOLs [net operating losses]."

Importantly, the analysts upgraded their opinion on Viavi's stock despite the situation

"We are upgrading Viavi to 'buy' because we are increasingly bullish on a 'super cycle' in test and measurement for fiber and 5G access, 400G/600G/800G optical and 400G data centers," they wrote. "We are also incrementally positive on the sustainability of strong currency anti-counterfeiting demand due to global stimulus and inflation."

The development caps a busy month for Exfo and Viavi. Germain Lamonde, Exfo's founder who controls 94% of the Canadian company's voting rights, said earlier this month he wanted to take Exfo private by acquiring all the company's shares. One of Lamonde's goals is to ensure the company remains based in Quebec.

However, according to Lamonde, Viavi has made several attempts during the past few months to acquire Exfo. The company's most recent offer values Exfo at $6 per share, or roughly 25% more than Lamonde's offer to take the company private. Nonetheless, Lamonde reiterated his opposition to Viavi's latest takeover offer.

"Consistent with its fiduciary duties, Exfo's board of directors, with Mr. Germain Lamonde and Mr. Philippe Morin [Exfo's CEO] having recused themselves from the meeting, reviewed and diligently considered the [Viavi] proposal along with the special committee and their advisors," Exfo wrote in a statement Thursday. "The unambiguous statement by the controlling shareholder [Lamonde] that he rejects the proposal led Exfo's board of directors to conclude that it will not pursue the proposal."

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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