Keysight Technologies (US:KEYS) is attempting to create a dominant player in the telecommunications testing market with last week's surprise bid for competitor Spirent Communications (SPT). The US company is hoping to profit from the upcoming surge in 5G infrastructure investment as telecoms companies compete to get ahead of each other in the emerging market. However, there are concerns amongst analysts that regulators could block the deal given this would give the combined entity up to 80 per cent market share in the high-speed-ethernet (HSE) telecoms testing sector.
On 28 March, Keysight announced a formal bid of 199p per share for UK software company Spirent, at a 15 per cent premium to its share price. This came in just weeks after Viavi (US:VIAV) had an offer of 175p a share accepted by the Spirent board. Spirent has now backed the higher offer, which it will put to shareholders.
At the time of the Viavi bid, Numis analyst John Karidis believed the offer materially undervalued Spirent given its technology is already in use by clients whose spending looks set to rebound. Even with the larger offer from Keysight, Karidis still believes Spirent is being undervalued by 19 per cent given the growth in the 5G market expected next year. In particular, he expects T-Mobile to spend heavily as it attempts to disrupt the “AT&T/Verizon duopoly”.