UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December, 2005
SPIRENT plc
_____________________________________________________________________
(Translation of registrant's name into English)
Spirent House, Crawley Business Quarter, Fleming Way, Crawley, West Sussex
RH10 9QL, UK.
_____________________________________________________________________
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ..... No X
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ________
SPIRENT PLC
("the Company")
PROPOSED DISPOSAL OF THE HELLERMANNTYTON DIVISION ("HellermannTyton")
FOR GBP288.9 MILLION
TRADING UPDATE
London, UK - Thursday, 15 December 2005: Spirent plc (LSE: SPT; NYSE: SPM), a
leading communications technology company, today announces that it has entered
into an agreement for the sale of its Network Products group, the
HellermannTyton division, to funds controlled by Doughty Hanson & Co Limited
("Doughty Hanson").
Highlights
- Agreement to dispose of HellermannTyton to Doughty Hanson for a
consideration of approximately GBP288.9 million, at a cash free/debt free
equivalent value.
- Under the agreement Doughty Hanson assumes approximately GBP11.2 million
of debt, the balance of GBP277.7 million is payable in cash on completion.
- Disposal is consistent with Spirent's stated strategy of focusing on
growing its Communications group, whilst maximising the value of its other
businesses.
- Spirent intends to use the proceeds to:
-buy back up to GBP50.0 million of the Company's issued share capital
through an on-market share repurchase programme;
-support investment required to further Spirent's strategic objectives;
and, in order to strengthen its financial position, proceeds will be used to:
-repay Spirent's outstanding loan notes of GBP70.4 million ($124.8
million), together with the associated contractual make whole and
swap break fees totalling approximately GBP9.8 million ($17.5
million);
- make a special contribution into Spirent's UK final salary pension scheme
of GBP47.0 million, being the most recent estimate of the deficit in
accordance with IAS 19.
- The disposal will result in near-term earnings dilution for Spirent but
will strengthen its overall financial position.
Trading update
In relation to current trading, the continuing Group's overall performance is in
line with expectations. Reduced losses in the Service Assurance division have
mitigated some weakness in the Performance Analysis division, resulting from
third quarter revenue being lower than had been previously forecast.
Anders Gustafsson, Chief Executive, commented:
"We are very pleased that we have agreed the sale of the Network Products group
for GBP288.9 million. This strengthens our overall financial position and
realises significant value, which will enable us to execute our strategy to
invest in and grow our communications activities. We continue to believe that
the telecoms test and monitoring market offers good medium term growth
prospects.
"We are also pleased to announce that Spirent intends to return up to GBP50.0
million of the proceeds to shareholders."
Other information
Completion of the disposal is conditional upon, inter alia, the approval of
shareholders, to be sought at an Extraordinary General Meeting to be convened on
24 January 2006 and the fulfilment of certain anti-trust regulatory clearances.
Completion is expected as soon as possible thereafter.
Gleacher Shacklock LLP and JPMorgan Cazenove Limited are acting as Financial
Advisers to the Company in relation to the disposal.
A presentation for analysts will be held at 10.45 for 11.00am today at the
offices of Smithfield, 10 Aldersgate Street, London, EC1.
A webcast of the meeting will be available later today at www.spirent.com
Photography is available from UPPA (Universal Pictorial Press & Agency) -
www.uppa.co.uk or tel: 020 7421 6000
Enquiries
Anders Gustafsson, Chief Executive Spirent plc +44 (0)1293 767676
Eric Hutchinson, Finance Director
Tim Shacklock Gleacher Shacklock LLP +44 (0)20 7484 1150
Edward Cumming-Bruce
Julian Cazalet JPMorgan Cazenove Ltd +44 (0)20 7588 2828
Andrew Hodgkin
Reg Hoare Smithfield +44 (0)20 7360 4900
Katie Hunt
About Spirent
Spirent is a leading communications technology company focused on delivering
innovative systems and services to meet the needs of customers worldwide. We are
a global provider of performance analysis and service assurance solutions that
enable the development and deployment of next-generation networking technologies
such as broadband services, Internet telephony, 3G wireless and web applications
and security testing. The Network Products business is a developer and
manufacturer of innovative solutions for fastening, identification, protection
and connectivity in electrical and communications networks marketed under the
global brand HellermannTyton. The Systems group develops power control systems
for specialist electrical vehicles in the mobility and industrial markets.
Further information about Spirent plc can be found at www.spirent.com
Spirent Ordinary shares are traded on the London Stock Exchange (ticker: SPT)
and on the New York Stock Exchange (ticker: SPM; CUSIP number: 84856M209) in the
form of American Depositary Shares (ADS), represented by American Depositary
Receipts, with one ADS representing four Ordinary shares.
Spirent and the Spirent logo are trademarks or registered trademarks of Spirent
plc. All other trademarks or registered trademarks mentioned herein are held by
their respective companies. All rights reserved.
This press release may contain forward-looking statements (as that term is
defined in the United States Private Securities Litigation Reform Act of 1995)
based on current expectations or beliefs, as well as assumptions about future
events. You can sometimes, but not always, identify these statements by the use
of a date in the future or such words as "will", "anticipate", "estimate",
"expect", "project", "intend", "plan", "should", "may", "assume" and other
similar words. By their nature, forward-looking statements are inherently
predictive and speculative and involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future. You should
not place undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that could cause our
actual results to differ materially from those expressed or implied by these
statements. Such factors include, but are not limited to: the extent to which
customers continue to invest in next-generation technology and deploy advanced
IP-based services; our ability to successfully expand our customer base; our
ability to continue to benefit from generally improving market conditions; the
prevailing market conditions and pace of economic recovery; our ability to
improve efficiency, achieve the benefits of our cost reduction goals and adapt
to economic changes and other changes in demand or market conditions; our
ability to develop and commercialise new products and services, extend our
existing capabilities in IP services and expand our product offering
internationally; our ability to attract and retain qualified personnel; the
effects of competition on our business; fluctuations in exchange rates and heavy
exposure to a weak US dollar; changes in the business, financial condition or
prospects of one or more of our major customers; risks of doing business
internationally; the financial burden of our pension fund deficit; risks
relating to the acquisition or sale of businesses and our subsequent ability to
integrate businesses; our reliance on proprietary technology; our exposure to
liabilities for product defects; our reliance on third party manufacturers and
suppliers; and other risks described from time to time in Spirent plc's
Securities and Exchange Commission periodic reports and filings.
Gleacher Shacklock LLP and JPMorgan Cazenove Limited, who are authorised and
regulated in the United Kingdom by the Financial Services Authority, are acting
exclusively for Spirent plc. Gleacher Shacklock LLP and JPMorgan Cazenove
Limited are not acting for any other person in relation to the disposal and
Gleacher Shacklock LLP and JPMorgan Cazenove Limited will not be responsible to
any person other than Spirent plc for providing the protections afforded to
clients of Gleacher Shacklock LLP and JPMorgan Cazenove Limited or for providing
advice in relation to the contents of this document or the disposal.
Proposed disposal of the HellermannTyton Division
Introduction
On 19 September 2005, Spirent announced that it had started a formal process
that was expected to result in the sale of its Network Products group, the
HellermannTyton Division. Today, Spirent announces that it has entered into an
agreement with funds controlled by Doughty Hanson & Co Limited ("Doughty
Hanson") for the sale of the HellermannTyton Division for a cash free/debt free
equivalent value of approximately GBP288.9 million. Under the disposal
agreement, Doughty Hanson will assume approximately GBP11.2 million of debt, the
balance of GBP277.7 million is payable in cash on completion.
In view of the size of the disposal, it is conditional, among other things, on
the approval of shareholders, which will be sought at an EGM of the Company to
be convened on 24 January 2006 and the fulfilment of certain anti-trust
regulatory clearances.
Background to and reasons for the disposal
Spirent is a leading communications technology company, focused on delivering
innovative systems and services to meet the needs of customers worldwide. Its
operations are currently organised into three operating groups: Spirent
Communications (comprising the Performance Analysis division and the Service
Assurance division), the HellermannTyton Division and the Systems group.
Spirent believes that now is a good time to realise value from its interest in
the HellermannTyton Division and strengthen its overall financial position. This
decision is consistent with Spirent's stated strategy of focusing on growing
Spirent Communications whilst maximising the value of its other businesses. The
proposed disposal of the HellermannTyton Division will realise significant value
and enable the continuing Group to execute its strategy to focus on
consolidating and expanding its position as a market leader in the provision of
communications test and measurement solutions, whilst strengthening its
financial position.
In the financial statements for Spirent for the year ended 31 December 2004,
Spirent had total turnover of GBP475.0 million and operating profit before
goodwill amortisation and exceptional items of GBP42.8 million. Spirent
Communications remains our largest business in terms of turnover, representing
53 per cent of ongoing turnover in the year ended 31 December 2004 (52 per cent.
in 2003).
Information on the HellermannTyton Division
The HellermannTyton Division develops and manufactures innovative solutions for
fastening, identification, protection and connectivity in electrical and
communications networks, marketed under the global brand "HellermannTyton". Its
products include a broad range of high-grade nylon ties, clips, channels and
fixings for fastening cables and wires in a broad range of applications. It also
produces products with identification and security features. Its heatshrink
insulation, convoluted tubing and cable covering products provide insulation and
physical protection for wires and cables. It also produces a range of products
used in the installation of local area and wide area communications networks. It
has operations in 32 countries and serves a broad range of customers worldwide.
The HellermannTyton Division includes a 49 per cent. interest in Tyton Company
of Japan, Limited ("TCJ"), an associate company which represents the
HellermannTyton business in Japan.
In 2004 the HellermannTyton Division had turnover of GBP187.8 million, operating
profit before goodwill amortisation and exceptional items of GBP21.1 million and
profit before taxation of GBP22.9 million. At 31 December 2004 the
HellermannTyton Division had GBP147.8 million of total assets including the book
value of its investment in associates of GBP15.8 million.
Terms of the disposal
Spirent entered into a disposal agreement on 15 December 2005 for the sale of
the HellermannTyton Division to Doughty Hanson for a cash free/debt free
equivalent value of approximately GBP288.9 million including assumed debt of
GBP11.2 million, the balance of GBP277.7 million is payable in cash on
completion. This consideration is subject to adjustments to be calculated by
comparing the estimated net assets of the HellermannTyton Division as at 31
December 2005 to the net assets of the HellermannTyton Division at completion on
a pound for pound basis.
The disposal agreement provides for Doughty Hanson to acquire the shares not
owned by Spirent in TCJ for a price of JPY 5.3 billion (approximately GBP25.3
million at current exchange rates). Under the terms of an option agreement
between Spirent and the other shareholders in TCJ, Spirent has the right to
acquire those shares for the purpose of the disposal for the same amount. The
net proceeds of the disposal for Spirent (before any net asset adjustment) will
not be affected whether or not Doughty Hanson acquires those shares.
Financial effects of the disposal and use of proceeds
The disposal will enable Spirent management to focus on Spirent Communications,
which we believe offers good prospects for growth both organically and by
selective acquisitions.
Whilst the disposal of the HellermannTyton Division will result in near-term
earnings dilution for the continuing Group, it will however strengthen Spirent's
financial position.
The proceeds of the disposal are intended to be used as follows:
- to repay the outstanding loan notes of GBP70.4 million ($124.8 million)
together with the amount which becomes due in the event of early repayment
of GBP7.8 million ($13.9 million);
- break fees in respect of interest rate swaps which have been taken out
by Spirent in connection with the loan notes of GBP2.0 million ($3.6
million);
- to make a special contribution of GBP47.0 million into the UK final salary
pension scheme, being the Company's most recent estimate of the deficit in
accordance with IAS 19;
- the Board intends to return up to GBP50.0 million to shareholders through
on-market share repurchases, further details of which are included below;
and
- the anticipated remaining proceeds of approximately GBP82.1 million will
be available to meet the working capital needs of the continuing Group and
fund additional investment in Spirent Communications to accelerate the
growth of the business and the delivery of new and innovative solutions to
market, thus reinforcing and expanding its market position.
Current trading and prospects
On 11 August 2005, the Spirent Group announced its unaudited results for the
first half of 2005 in which it reported that all Spirent businesses had
increased revenue and operating profit in the first half of 2005, with the
exception of the Service Assurance division, which had reported a loss of GBP9.0
million.
Overall, Spirent anticipates that the operating profit of Spirent Communications
as a whole for the full year will be in line with expectations, with reduced
losses in the Service Assurance division mitigating some weakness in the
Performance Analysis division.
Spirent indicated in its interim results announcement that the market for the
Performance Analysis division was variable in terms of end customer demand
principally in the broadband test activities. These conditions have continued,
resulting in revenue for the third quarter being lower than had been previously
forecast. As a consequence, the full year operating profit in this division is
likely to be somewhat below expectations.
The performance of the new unified platform for Ethernet testing, Spirent
TestCenterTM, has been encouraging with a number of orders from strategically
important and new customers having been secured in the second half year. The
division's wireless and position location test activities have also continued to
experience good growth.
In the Service Assurance division, revenue for the second half year is projected
to be in line with expectations. However, the unaudited operating loss for the
second half year is likely to be less than previously anticipated, being in the
region of GBP1 million, and substantially reduced from that reported for the
first half year. This reduced loss is a result of the benefits achieved from
restructuring in the first half combined with further tight cost control. The
Service Assurance division has also experienced improved profitability in the
second half year compared with the first half due to increased software revenue
at higher margins.
Spirent continues to believe that the markets in which Spirent Communications
operates offer good growth prospects over the medium term.
The Systems group is performing in line with expectations and continues to enjoy
solid growth prospects.
Proposed on-market share repurchases
As set out above, Spirent has indicated that it intends to return up to GBP50
million to its shareholders (which at the current share price represents 10.3
per cent. of the issued Ordinary share capital of Spirent) through an on-market
share repurchase programme. In order to implement this programme, there are a
number of steps that Spirent will need to take. These will include the
following:
(a) Spirent currently has the approval from its shareholders to repurchase
on-market up to 5 per cent. of its issued Ordinary share capital. Spirent
intends to seek further shareholders' approval, as is necessary, to implement
the programme at its AGM in 2006;
(b) At an EGM on 26 October 2004, Spirent's shareholders approved a cancellation
of the share premium account and the capital redemption reserve and on 24
November 2004, the Chancery division of the High Court confirmed that
cancellation. Spirent gave certain undertakings to the High Court in connection
with that cancellation. In order to implement an on-market share repurchase
programme, Spirent will need to have available distributable reserves and in
order for reserves to become available for distribution, Spirent will need to
discharge certain obligations of these undertakings; and
(c) A share repurchase is a type of transaction in respect of which it may be
appropriate to seek clearance from the Pensions Regulator and Spirent will
consider whether this is appropriate in light of all circumstances at the time.
- Ends-
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
______LUKE THOMAS______
(Registrant)
Date 15 December, 2005 By ____/s/ Luke Thomas____
(Signature)*