CommScope Holding Company has agreed to acquire TE Connectivity’s Telecom, Enterprise and Wireless businesses in an all-cash transaction valued at approximately $3bn. The transaction, which was approved by the boards of directors of both companies, is expected to accelerate CommScope’s strategy to drive profitable growth by entering into attractive adjacent markets and to broaden its position as a leading communications infrastructure provider. In addition, CommScope will have greater geographic and business diversity following the completion of the transaction.
The Telecom, Enterprise and Wireless businesses of TE Connectivity, a world leader in fiber optic connectivity for wireline and wireless networks, generated annual revenues of approximately $1.9bn in its fiscal year ended September 26, 2014, consisting of $1.1bn from its Telecom business, where it is a world leader; $627 million from Enterprise; and $164m from Wireless. The combined company’s pro forma results for the twelve months ended September 30th, 2014 would have been approximately $5.8bn in net sales and $1.2bn in pro forma adjusted EBITDA. The transaction is expected to be in excess of 20% accretive to CommScope’s adjusted earnings per share by the end of the first full year after closing and on a pro forma basis, excluding purchase accounting charges, transition costs and other special items.
“This is an important and transformative acquisition for CommScope, bringing together complementary geographic and customer coverage, products and technologies for the benefit of our stockholders, customers and employees,” said Eddie Edwards, CommScope president and chief executive officer. “This transaction has many clear strategic and financial benefits for all of our stakeholders. It creates enhanced scale with a combined, diversified portfolio that we believe is well-positioned to take advantage of opportunities in the marketplace.
“We look forward to welcoming the TE Connectivity businesses to CommScope, which will bring top talent, strong customer relationships in growing markets and a robust pipeline of innovations. CommScope has a strong track record of disciplined strategic acquisitions and successful integrations, and we look forward to working with the TE Connectivity team to bring these assets together as cohesively and expeditiously as possible.”
“CommScope is a proven industry leader, and we believe it is the right company to lead our Telecom, Enterprise and Wireless businesses forward,” said Tom Lynch, TE Connectivity chairman and chief executive officer. “Our dedicated employees have been instrumental in the success of these businesses, and we are confident in their ability to continue to deliver. We look forward to working closely with the CommScope management team to close the transaction.”
Transaction Expected to Position CommScope for Future Growth and Value Creation Through:
· Establishing Leading Positions Across Diverse and Growing Product Segments and Geographies: This transaction is expected to provide CommScope with the opportunity to expand into the adjacent wireline telecom networks/fiber-to-the-X (FTTx) market and meet the steadily growing demand for broadband services in developed and emerging markets. Upon completion of the transaction, CommScope’s overall sales concentration would be more balanced based on the 12 months ending September 30, 2014:
o Wireless—approximately 46% of sales, versus 65%;
o Enterprise—approximately 26% of sales, versus 22%; and
o Broadband Connectivity—approximately 28% of sales, versus 13%.
Furthermore, with TE Connectivity’s strong presence in the Europe, Middle East, Africa and Asia Pacific regions, the combined company is expected to meaningfully expand its footprint and global competitive position.