Spirent Communications plc
5 December 2006
Spirent Communications plc
Response to letter from Sherborne Investors
The Board of Spirent Communications plc ("Spirent" or the "Company") has noted
the statement issued today by Sherborne Investors GP LLC ("Sherborne"). This
statement makes a number of points that merit comment.
Points with which we agree
1. Strategy
We note that Sherborne has acknowledged that it has no alternative strategy to
propose to shareholders than that already being implemented by your Board...."We
(Sherborne) believe it is unlikely that the Company's position will be greatly
improved by new and radical strategic initiatives."
2. Corporate governance
We also note Sherborne acknowledges that...."The board structure that we
(Sherborne) have proposed is not in full compliance with the best practices
prescribed by the Combined Code on Corporate Governance."
Points which we dispute
3. Company performance
Sherborne attempts to persuade you that Spirent is underperforming. The reality
is that the Company is in transition against the background of very challenging
industry conditions.
Furthermore, Sherborne misleads shareholders in its letter as to the
profitability of our core Performance Analysis business. Sherborne states...."it
is not healthy for a well-established business such as Performance Analysis to
be unable to do much more than to break even with a sales level approaching £200
million per year." But the reference in the statement above is to an annualised
level of sales and there is nothing in analysts' published expectations for the
current year to support Sherborne's assertion. Performance Analysis reported an
operating profit of £15.9 million on sales of £178.8 million for the year ended
31 December 2005.
4. Control
Sherborne states that it is not seeking "to control Spirent without paying a
premium". But clearly it is. It proposes to replace Spirent's Chairman, the
Chairman of the Audit Committee and the Chairman of the Remuneration Committee
and appoint one further director. As a consequence, five of your existing
directors would leave the Board. Sherborne would therefore have effective
control of the Board. Furthermore, Mr Bramson admitted this objective at a
meeting on 14 November 2006 when he rejected your Board's offer to allow him and
one nominee to join the Board as it did not give him "sufficient control".
5. Turnaround approach
Having accepted your Board's strategy, Sherborne argues that it is better placed
to implement its execution. But this is not the case for two key reasons.
First, Spirent is not the turnaround candidate Sherborne would have you believe.
A huge amount has already been done by your Board that rescued the Company from
near bankruptcy in late 2002, subsequently restructuring it into its current
shape. What is required now is to balance ongoing cost reduction progress with
investment in the core business to further strengthen Spirent's competitive
position. This is not the task of a turnaround team.
Second, it is not the task of a turnaround team that lacks meaningful telecoms
sector experience. Mr Bramson refers today to his chairmanship of Ampex as a key
part of his experience. Yet Ampex is not directly in the telecoms sector. Mr
Eastman was formerly an investment banker before joining Sherborne, not an
experienced businessman who has led major enterprises. Furthermore, neither Mr
Walker nor Mr Brindle appear able to claim any experience of managing businesses
in this sector.
This lack of experience contrasts with the direct and relevant knowledge base
that Spirent will lose if Sherborne's appointees are elected. The five
non-executive directors who would leave the board in these circumstances have a
strong track record running major businesses and proven experience that is
directly relevant to the sector in which Spirent operates.
In summary
Much has been done in recent years to transform Spirent from a company in a
precarious financial position to one that is poised to take advantage of this
hard work and investment. Sherborne has little to add to the programme that is
underway and instead is likely to cause considerable disruption at a key time.
John Weston, Chairman of Spirent, said:
"Sherborne's statement confirms that they have no alternative strategy for the
Company and lack the relevant experience to run it better than the existing
board. Sherborne's claimed turnaround skills are not relevant to the next stage
of Spirent's development and their attempt to take control will, if successful,
result in needless disruption. I encourage all shareholders to vote AGAINST the
proposed resolutions."
For further information please contact:
Reg Hoare Smithfield +44 (0)20 7360 4900
Angus Maitland Maitland +44 (0)20 7379 5151
About Spirent Communications plc
Spirent Communications plc is a leading communications technology company
focused on delivering innovative systems and services to meet the needs of cus
tomers 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 Systems
group develops power control systems for specialist electrical vehicles in the
mobility and industrial markets. Further information about Spirent
Communications plc can be found at www.spirent.com.
Spirent Communications plc 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
Communications 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. The Company undertakes no obligation to update any forward-looking
statements contained in this press release, whether as a result of new
information, future events or otherwise.
END
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Spirent Communications PLC announces Response to Sherborne
| Source: Spirent Communications PLC
Crawley, UK -- (MARKET WIRE) -- December 5, 2006 --