VIAVI Solutions ( VIAV ) penned a deal to acquire Spirent Communications ( SPNUF ) (OTC:SPMYY) for approximately £1.0 billion ($1.3 billion) in a cash offer.

The acquisition price values Spirent based on the British pound sterling to U.S. dollar exchange rate on March 4, 2024.

Spirent offers products, services and managed solutions that address technologies’ test, assurance and automation challenges, including 5G, software-defined wide area networks (SD-WAN), cloud and autonomous vehicles. 

As per the terms, Spirent shareholders will receive 172.5 pence per share in cash along with a special dividend per share of 2.5 pence in place of a final dividend for the year ended December 31, 2023. Spirent Board intends to unanimously recommend this all-cash offer.

The company plans to fund the buyout with its existing cash, a fully committed $800 million 7-year term loan, and a $400 million investment from Silver Lake in the form of a fully committed senior convertible note.

In connection with the Silver Lake investment, Ken Hao, Chairman and a Managing Partner of Silver Lake, will join the VIAVI board.

The acquisition is expected to close in the second half of 2024, subject to shareholder approvals and other customary closing conditions.

Oleg Khaykin, President and CEO of VIAVI, said, “Combining our leading communications test and measurement and optical technologies and Spirent’s high-performance testing and assurance solutions is expected to deliver enhanced product solutions and applications, accelerate growth in new markets and strengthen innovation through expanded engineering and design capabilities.”

Synergies: VIAVI projects operational efficiencies to result in annual run-rate cost synergies of up to $75 million approximately two years after the deal’s completion.

Also, the company expects to utilize its U.S. net operating losses to lower the combined group’s blended non-GAAP tax rate and plans to prioritize debt paydown using free cash flow generation to reduce leverage ratios towards 4.0x gross and 3.0x net over the long term.

As of December 30, 2023, the company held $571.8 million in total cash, short-term investments, and short-term restricted cash.

Price Action: VIAV shares closed at $9.73 on Monday.