Keysight and IxiaKeysight Technologies, Inc. and Ixia announced a definitive agreement for Keysight to acquire Ixia in an all-cash transaction of approximately $1.6 billion, net of cash.

The boards of directors of both companies unanimously approved the transaction, which is expected to close by the end of October 2017. The deal must be approved by Ixia shareholders and requires government anti-trust review.

Ixia shareholders will receive $19.65 per share in cash, a premium of approximately 45 percent to Ixia’s closing stock price on December 1, 2016 — the last trading day prior to media reports that Ixia was considering strategic alternatives.

Ixia provides testing, visibility and security solutions that strengthen applications across physical and virtual networks for enterprises, service providers and network equipment manufacturers. Ixia has a broad IP portfolio that encompasses network communications, visibility, application and security technologies with solutions rooted in software. During a call with financial analysts, Ron Nersesian, Keysight president and CEO, said that Ixia has approximately $500 million in annual revenue, with gross margin approaching 80 percent and adjusted EDITDA of some $100 million.

“The proposed acquisition of Ixia is in direct alignment with our strategy to transform Keysight for growth and is 100 percent complementary to our business,” said Nersesian. Ixia’s networking and wireless protocols will extend Keysight’s position in wireless communications.

Comments by Ron Nersesian during financial analysts call on January 30.

A Keysight press release noted the following benefits of the acquisition:

  • Enable Layer 1 through 7 end-to-end solutions for assessing performance from the mobile device to the data center and the cloud,
  • Expand Keysight’s software capabilities by adding engineering talent and software-centric solutions with a high gross-margin profile, and
  • Increase Keysight’s market (SAM) by approximately $2.5 billion and establish a strong position in fast-growing segments.

Keysight said the combined company will have an attractive financial profile with enhanced cash flow driven by synergies, scale and improved revenue growth. The company expects the transaction to be immediately accretive to adjusted earnings with annual cost synergies of $60 million, of which $50 million is expected to be achieved within 24 months. Revenue synergies are expected to be in excess of $50 million by year three and $100 million by year five.

The combined company will serve over 100 countries around the world, and Keysight’s worldwide sales channel will provide Ixia access to previously untapped non-US network equipment manufacturers, particularly in Asia.

“We are confident that Keysight is the ideal partner to accelerate our growth initiatives and will continue to build upon our successful 20-year history,” said Bethany Mayer, Ixia president and CEO. “Ixia and Keysight share many of the same values, including our dedication to innovation of leading-edge technologies and commitment to operational excellence and financial discipline, which combine to create value for shareholders.”

During a call with financial analysts to discuss the transaction, Keysight provided the following presentation:

Keysight Ixia Acquisition Investor-Presentation FINAL 20170129 by speedybits on Scribd