Canaccord Genuity stays at 'speculative buy' on Spirent Communications
Spirent Communications
171.00p
12:59 23/09/24
Analysts at Canaccord Genuity took a fresh look at telecommunications testing company Spirent Communications on Monday following a Reuters report that revealed Viavi "could make another bid" for the company should Keysight's recommended 199.0p per share offer fail due to regulatory concerns.
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Canaccord Genuity noted that Viavi tabled its first bid for Spirent in March and was subsequently trumped by Keysight, with its "materially greater financial firepower" and "significantly greater product overlap" with Spirent.
The Canadian bank believes the Reuters article supported its investment case on two fronts - that the Keysight/Spirent deal co-operation agreement has a 'hell or high water' clause in it, which means Keysight has effectively taken on the regulatory risk of this transaction, and also that the article further quotes a source saying the deal with Keysight was "moving along as Spirent expects".
Canaccord maintained its 'speculative buy' rating and 199.0p target price as it noted a potential 'Viavi put' created a helpful backstop that should give Spirent shareholders extra confidence. However, at this stage the analysts fully expect Keysight to see its offer through.
"At 171.0p, there is ~16% upside to its approved 199.0p cash offer. Shareholders are further entitled to a 2.5p (1.5%) dividend before deal closure, with an extra 1.0p paid should this take beyond 30 June 2025. We hence calculate a 17.5% TSR assuming deal closure in the guided Nov 2024 - Apr 2025 window," concluded Canaccord.
Reporting by Iain Gilbert at Sharecast.com