Viavi Solutions Inc. VIAV entered into a definitive agreement with Keysight Technologies, Inc. KEYS to acquire the high-speed ethernet and network security business of Spirent Communications. The transaction is valued at $410 million in base cash consideration and $15 million in contingent cash consideration. The purchase is expected to be completed by the second quarter of 2025, subject to regulatory approvals.

Background

On March 2024, Viavi inked an agreement to acquire Spirent for approximately $1.3 billion, with the latter’s shareholders set to receive 172.5 pence per share in cash along with a special dividend of 2.5 pence. Shortly after that, Keysight made a formal bid to buy Spirent Communications for around $1.46 billion, countering Viavi’s offer of $1.3 billion. Keysight’s buyout proposal received approval from Spirent shareholders in May 2024. Following this development, KEYS announced its decision to divest Spirent’s high-speed ethernet and network security businesses to meet the necessary regulatory requirements and increase the likelihood of obtaining regulatory approval.

The acquisition process of Spirent by Keysight is currently in advanced stages, with Keysight committed to completing the process by April 2025. KEYS expects the sale of Spirent’s ethernet and network security business to Viavi will be effective shortly after the completion of the buyout. Keysight will retain Spirent’s rest of the Lifecycle Service Assurance business line.

Will This Buyout Drive VIAV’s Share Performance?

Spirent boasts a comprehensive portfolio of ethernet testing and network security solution that facilitates effective validation of performance and security of advanced networks, data center connectivity fabrics and applications by replicating real word conditions in the lab and on the network. With decades of industry expertise, Spirent has a strong customer base that includes network vendors, carriers, service providers and several other enterprise customers.

Viavi’s Network Enablement and Service Enablement segment boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics, helping to build, test, certify, maintain and optimize complex physical and virtual networks.

The acquisition of Spirent’s ethernet and network security business offers several strategic advantages for Viavi. Spirent’s product offerings complement Viavi’s portfolio. The acquisition will integrate software, hardware and protocol domain expertise across network layers, bolstering Viavi’s ethernet testing platform. This will significantly boost Viavi’s commercial prospects in the fast-growing security, ethernet, data center, AI and digital infrastructure end markets. This bodes well for long-term growth.

Moreover, the transaction is expected to accretive to Viavi’s financial performance, likely to add $180 million in revenues in the Network and Service Enablement segments following the first 12 months of the acquisition. It is also expected to be accretive to its 12 months EPS post-closing.

Viavi Stock’s Price Movement

Shares of Viavi have gained 10.9% in the past year compared with the industry’s growth of 26.9%.

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VIAV’s Zacks Rank and Stocks to Consider

Viavi currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry have been discussed below.

InterDigital IDCC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, it delivered an earnings surprise of 158.41%. It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.

Celestica Inc. CLS sports a Zacks Rank #1 at present. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers.

United States Cellular Corporation USM sports a Zacks Rank of 1 at present. In the last reported quarter, it delivered an earnings surprise of 150%.

U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology.

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United States Cellular Corporation (USM) : Free Stock Analysis Report

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