5th Dec 2006 17:21
Spirent Communications PLC05 December 2006 Spirent Communications plc5 December 2006 Spirent Communications plc Response to letter from Sherborne Investors The Board of Spirent Communications plc ("Spirent" or the "Company") has notedthe statement issued today by Sherborne Investors GP LLC ("Sherborne"). Thisstatement 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 topropose to shareholders than that already being implemented by your Board...."We(Sherborne) believe it is unlikely that the Company's position will be greatlyimproved 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 practicesprescribed by the Combined Code on Corporate Governance." Points which we dispute 3. Company performance Sherborne attempts to persuade you that Spirent is underperforming. The realityis that the Company is in transition against the background of very challengingindustry conditions. Furthermore, Sherborne misleads shareholders in its letter as to theprofitability of our core Performance Analysis business. Sherborne states...."itis not healthy for a well-established business such as Performance Analysis tobe unable to do much more than to break even with a sales level approaching £200million per year." But the reference in the statement above is to an annualisedlevel of sales and there is nothing in analysts' published expectations for thecurrent year to support Sherborne's assertion. Performance Analysis reported anoperating profit of £15.9 million on sales of £178.8 million for the year ended31 December 2005. 4. Control Sherborne states that it is not seeking "to control Spirent without paying apremium". But clearly it is. It proposes to replace Spirent's Chairman, theChairman of the Audit Committee and the Chairman of the Remuneration Committeeand appoint one further director. As a consequence, five of your existingdirectors would leave the Board. Sherborne would therefore have effectivecontrol of the Board. Furthermore, Mr Bramson admitted this objective at ameeting on 14 November 2006 when he rejected your Board's offer to allow him andone 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 placedto 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 fromnear bankruptcy in late 2002, subsequently restructuring it into its currentshape. What is required now is to balance ongoing cost reduction progress withinvestment in the core business to further strengthen Spirent's competitiveposition. This is not the task of a turnaround team. Second, it is not the task of a turnaround team that lacks meaningful telecomssector experience. Mr Bramson refers today to his chairmanship of Ampex as a keypart of his experience. Yet Ampex is not directly in the telecoms sector. MrEastman was formerly an investment banker before joining Sherborne, not anexperienced businessman who has led major enterprises. Furthermore, neither MrWalker nor Mr Brindle appear able to claim any experience of managing businessesin this sector. This lack of experience contrasts with the direct and relevant knowledge basethat Spirent will lose if Sherborne's appointees are elected. The fivenon-executive directors who would leave the board in these circumstances have astrong track record running major businesses and proven experience that isdirectly relevant to the sector in which Spirent operates. In summary Much has been done in recent years to transform Spirent from a company in aprecarious financial position to one that is poised to take advantage of thishard work and investment. Sherborne has little to add to the programme that isunderway 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 theCompany and lack the relevant experience to run it better than the existingboard. Sherborne's claimed turnaround skills are not relevant to the next stageof Spirent's development and their attempt to take control will, if successful,result in needless disruption. I encourage all shareholders to vote AGAINST theproposed resolutions." For further information please contact: Reg Hoare Smithfield +44 (0)20 7360 4900Angus Maitland Maitland +44 (0)20 7379 5151 About Spirent Communications plc Spirent Communications plc is a leading communications technology companyfocused on delivering innovative systems and services to meet the needs of customers worldwide. We are a global provider of performance analysis and serviceassurance solutions that enable the development and deployment ofnext-generation networking technologies such as broadband services, Internettelephony, 3G wireless and web applications and security testing. The Systemsgroup develops power control systems for specialist electrical vehicles in themobility and industrial markets. Further information about SpirentCommunications plc can be found at www.spirent.com. Spirent Communications plc Ordinary shares are traded on the London StockExchange (ticker: SPT) and on the New York Stock Exchange (ticker: SPM; CUSIPnumber: 84856M209) in the form of American Depositary Shares ("ADS"),represented by American Depositary Receipts, with one ADS representing fourOrdinary shares. Spirent and the Spirent logo are trademarks or registered trademarks of SpirentCommunications plc. All other trademarks or registered trademarks mentionedherein are held by their respective companies. All rights reserved. This press release may contain forward-looking statements (as that term isdefined in the United States Private Securities Litigation Reform Act of 1995)based on current expectations or beliefs, as well as assumptions about futureevents. You can sometimes, but not always, identify these statements by the useof a date in the future or such words as "will", "anticipate", "estimate","expect", "project", "intend", "plan", "should", "may", "assume" and othersimilar words. By their nature, forward-looking statements are inherentlypredictive and speculative and involve risk and uncertainty because they relateto events and depend on circumstances that will occur in the future. You shouldnot place undue reliance on these forward-looking statements, which are not aguarantee of future performance and are subject to factors that could cause ouractual results to differ materially from those expressed or implied by thesestatements. The Company undertakes no obligation to update any forward-lookingstatements contained in this press release, whether as a result of newinformation, future events or otherwise. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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