Spirent Takeover

[UncleEbenezer]

Spirent Communications, having fallen rather badly through 2023, has become a takeover target. The share price has risen to around that of the higher of two offers, namely 199p per share. Which would represent a moderate profit for me, but well short of what it should be worth.

My view: it's tied to the politics of 5G, and the fallout from our fifth-columnists' doing Trump's bidding in support of America First. It seems likely that has now more-or-less worked through the system, so the future direction should tend to be upwards - and bidders presumably share that view. So I'm inclined to hold out for a better bid. Or sit on my hands if that doesn't happen.

Any thoughts?

SPT is no ARM, but must surely be one of the most important remaining tech stocks with a London listing!

[simoan]

Spirent Communications, having fallen rather badly through 2023, has become a takeover target. The share price has risen to around that of the higher of two offers, namely 199p per share. Which would represent a moderate profit for me, but well short of what it should be worth.

My view: it's tied to the politics of 5G, and the fallout from our fifth-columnists' doing Trump's bidding in support of America First. It seems likely that has now more-or-less worked through the system, so the future direction should tend to be upwards - and bidders presumably share that view. So I'm inclined to hold out for a better bid. Or sit on my hands if that doesn't happen.

Any thoughts?

SPT is no ARM, but must surely be one of the most important remaining tech stocks with a London listing!

Tbh It doesn’t matter how you vote because the takeover will happen regardless if the large institutional holders wish it to be so. By all means vote against if it makes you feel better, but just don’t be disappointed when the vote goes through. Unless a higher offer appears, it’s a done deal.

[simoan]

Spirent Communications, having fallen rather badly through 2023, has become a takeover target. The share price has risen to around that of the higher of two offers, namely 199p per share. Which would represent a moderate profit for me, but well short of what it should be worth.

My view: it's tied to the politics of 5G, and the fallout from our fifth-columnists' doing Trump's bidding in support of America First. It seems likely that has now more-or-less worked through the system, so the future direction should tend to be upwards - and bidders presumably share that view. So I'm inclined to hold out for a better bid. Or sit on my hands if that doesn't happen.

Any thoughts?

SPT is no ARM, but must surely be one of the most important remaining tech stocks with a London listing!

Tbh It doesn’t matter how you vote because the takeover will happen regardless if the large institutional holders wish it to be so. By all means vote against if it makes you feel better, but just don’t be disappointed when the vote goes through. Unless a higher offer appears, it’s a done deal.

BTW in case it’s not clear, I’m in the same position. I bought SPT as a quality long-term play on 5G rollout and unfortunately it didn’t work out, mainly due to an industry wide slowdown rather than company specific issues. As such, I am considering rolling over my investment into Keysight if the sale goes through. Clearly the acquisition is at a good price for Keysight and they have similarly high quality metrics and one less competitor for 5G contracts in future. They also have a strong balance sheet and can easily afford the acquisition.

[UncleEbenezer]

BTW in case it’s not clear, I’m in the same position. I bought SPT as a quality long-term play on 5G rollout and unfortunately it didn’t work out, mainly due to an industry wide slowdown rather than company specific issues.

Indeed. A minor casualty of our government's treachery.

As such, I am considering rolling over my investment into Keysight if the sale goes through. Clearly the acquisition is at a good price for Keysight and they have similarly high quality metrics and one less competitor for 5G contracts in future. They also have a strong balance sheet and can easily afford the acquisition.

Thanks for the thought. I took a cursory look, and I might very well do the same. But no need to decide quite yet.

[UncleEbenezer]

Most recent news I can see is https://investor.keysight.com/investor- ... fault.aspx .

But SPT is still trading as SPT, and the share price has drifted well below the takeover price. What gives? The market knows something?

The December release mentions regulatory approval in various countries. Among those is China, where the application was only submitted on November 25th, more than six months after the deal was approved by shareholders. Nor is it entirely clear whether the release lists every relevant regulatory approval. Is this slow pace normal/expected?

[simoan]

Most recent news I can see is https://investor.keysight.com/investor- ... fault.aspx .

But SPT is still trading as SPT, and the share price has drifted well below the takeover price. What gives? The market knows something?

The December release mentions regulatory approval in various countries. Among those is China, where the application was only submitted on November 25th, more than six months after the deal was approved by shareholders. Nor is it entirely clear whether the release lists every relevant regulatory approval. Is this slow pace normal/expected?

In my experience it can take a long time where there takeover/merger involves two of the large incumbents within an industry sector and so monopoly issues, pricing power etc. are a concern. This is normally worse where the two companies are suppliers to governments e.g. health, defence. I had the same situation with the takeovers of EMIS Group and Ultra Electronics most recently, and have seen it with other takeovers in a similar situation. I must admit it is tempting to just sell and move on.

[UncleEbenezer]

My half-baked thought was to buy some more ...

China approval could be an issue: the Chinese powers-that-be have every reason to want to retaliate against Trump and against the UK since our fifth-columnists forced a reluctant Boris to do his bidding. So the question there is, will the Chinese decision be political, or is their regulator sufficiently above politics?

But there's another joker: what if Trump surprises us again? The Huawei ban has served its purpose - held back 5G rollout in countries that did Trump's bidding, giving US players space to catch up. Trump has nobbled the competition to maximise the chances of the next generation of Googles and Amazons arising in the US. Could his next move be to mend relations with China on this issue?

[simoan]

My half-baked thought was to buy some more ...

China approval could be an issue: the Chinese powers-that-be have every reason to want to retaliate against Trump and against the UK since our fifth-columnists forced a reluctant Boris to do his bidding. So the question there is, will the Chinese decision be political, or is their regulator sufficiently above politics?

But there's another joker: what if Trump surprises us again? The Huawei ban has served its purpose - held back 5G rollout in countries that did Trump's bidding, giving US players space to catch up. Trump has nobbled the competition to maximise the chances of the next generation of Googles and Amazons arising in the US. Could his next move be to mend relations with China on this issue?

I would consider any decision by a Chinese institution to be that of the government. The two are the same thing and I would not consider any regulator in China to be independent. I have no idea whether US/China politics will affect the decision but I would presume so in the worst case of a trade spat. The offer was 199p plus a 2.5p dividend so there’s about 13% upside from the current 175p. To my mind, there’s a lot more downside should the Chinese reject the deal because even the 175p Viavi deal would likely be scuppered too, assuming they would still be interested. So,unless trading has improved significantly, which I greatly doubt, I would assume the share price would go most of the way back to whence it came. IMHO the upside to 201.5p is not enough and that it was the market is telling us with the 13% discount to the offer price. In the words of Clint: “Are you feeling lucky punk?”

All the best, Si

[UncleEbenezer]

New update today: deal is expected to complete by April.

Googling finds the UK CMA is investigating the deal, and in no great hurry: https://www.gov.uk/cma-cases/keysight-s ... er-inquiry

[simoan]

New update today: deal is expected to complete by April.

Googling finds the UK CMA is investigating the deal, and in no great hurry: https://www.gov.uk/cma-cases/keysight-s ... er-inquiry

The good news is that the head of the CMA was fired recently and Rachel Reeves is on their back to approve such deals more quickly all in the name of “growth”. See https://news.sky.com/story/chair-of-uks ... s-13293755

Anyway, I can wait til April.
All the best, Si

[simoan]

BTW a really strange thing happened today… Deutsche Bank has upgraded its price target for Spirent from 225p to 250p. Do they know something no-one else does? I normally totally ignore these price targets but given we have an agreed bid at a lower price I have no idea where there 250p comes from?? Not that i’ll be complaining if it comes to pass!

[UncleEbenezer]

BTW a really strange thing happened today… Deutsche Bank has upgraded its price target for Spirent from 225p to 250p. Do they know something no-one else does? I normally totally ignore these price targets but given we have an agreed bid at a lower price I have no idea where there 250p comes from?? Not that i’ll be complaining if it comes to pass!

I should ignore the whole wunch ...

I wonder if that's a target price in a hypothetical market with no takeovers? In which case, it would be in line with my sitting on my hands, as per the first post in this thread.

[simoan]

Just for full disclosure, I got cold feet before I left for a trip to Spain a couple of weeks ago and sold my SPT holding at 188.3p. I’ve just returned and notice Keysight issued an update on April 1st (surely not the best date to choose!) to say they expect it to complete by July 31st. I hope the takeover still goes ahead for anyone still holding but I’ve made my bed…

All the best, Si