(Reuters) - Keysight Technologies Inc (KEYS.N), a provider of software and equipment to the electronics industry, said on Monday it would buy U.S. data technology company Ixia XXIA.O for about $1.6 billion in cash in a bid to increase its software and security portfolio.
The $19.65 per share offer is at a premium of about 8 percent to Ixia’s Friday close and 45 percent higher than the last trading day before Reuters reported in December that Ixia was exploring a sale.
The deal comes as the increasing volume of data traffic flowing through social media, smartphones and cloud computing tests the resilience and integrity of networks, making Ixia’s equipment and applications more popular with its clients and coveted by its peers.
“The addition of Ixia will allow Keysight to grow faster,” Keysight CEO Ron Nersesian told investors on a conference call, referring to Ixia’s 80 percent gross margins.
Ixia makes equipment that monitors and tests networks so enterprise customers can have their data travel smoothly without bottlenecks. Its customers include the world’s No. 1 networking gear maker, Cisco Systems Inc (CSCO.O).
Santa Rosa, California-based Keysight spun off from life sciences manufacturer Agilent Technologies (A.N) in 2014. Ixia would be its largest acquisition since it bought Britain’s Anite Plc, a company that tests handsets and telecom networks, for about $600 million.
Shares of Calabasas, California-based Ixia were trading nearly 7 percent higher at $19.45 on Monday afternoon while Keysight shares were down 0.2 percent at $36.95.
“We don’t expect further bids nor do we see much risk to the deal closing,” Jefferies said in an analyst note on Monday. The deal is expected to close by the end of October.
Keysight said it had agreements in place with Errol Ginsberg, Ixia’s chairman and founder, and top shareholder Katelia Capital Group to vote in favor the deal.
Deutsche Bank advised Ixia while Goldman Sachs advised Keysight. Legal advisers were Bryan Cave LLP for Ixia and Cleary Gottlieb Steen & Hamilton LLP for Keysight.
Reuters was first to report on Sunday that the companies were nearing a deal.
Reporting by Liana B. Baker in San Francisco; additional reporting by Rishika Sadam in Bengaluru; Editing by Martina D'Couto and Matthew Lewis