HICKORY, N.C. - Thursday, January 29th 2015 [ME NewsWire]
Combination of Highly Complementary Businesses Broadens CommScope’s Position as a Leading Communications Infrastructure Provider
Expanded Offerings Position CommScope to Meet Growing Demand for Bandwidth
Transaction
Expected to be Significantly Accretive to CommScope’s Adjusted EPS and
Exceed $150 Million in Annual Synergies Beginning in Third Year
Following Closing
Transaction Valued at $3 Billion
(BUSINESS
WIRE)-- CommScope Holding Company, Inc. (NASDAQ: COMM) has agreed to
acquire TE Connectivity’s (NYSE: TEL) Telecom, Enterprise and Wireless
businesses in an all-cash transaction valued at approximately $3
billion. 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 $1.9 billion in its fiscal
year ended September 26, 2014, consisting of $1.1 billion from its
Telecom business, where it is a world leader; $627 million from
Enterprise; and $164 million from Wireless. The combined company’s pro
forma results for the twelve months ended September 30, 2014 would have
been approximately $5.8 billion in net sales and $1.2 billion 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:
Wireless—approximately 46% of sales, versus 65%;
Enterprise—approximately 26% of sales, versus 22%; and
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.
Significantly Expanding Platform for Innovative Solutions: The
transaction is expected to substantially expand CommScope’s foundation
of innovation with the addition of approximately 7,000 patents and
patent applications worldwide from TE Connectivity. Further, TE
Connectivity’s leading fiber technology is expected to help CommScope
better address a transition to fiber deployments deeper into networks
and data centers as consumers and businesses generate increasing
bandwidth requirements. With these additional innovative solutions,
CommScope expects to solve more customer communications challenges,
while providing greater opportunities to its business partners.
Creating Complementary Market Opportunities: The combined company is
expected to have the technology, solutions and talent to provide greater
value and a broader range of services to its customers and partners.
Additionally, TE Connectivity’s existing relationships with key industry
participants are expected to enable the combined company to
meaningfully strengthen its position across multiple markets.
Offering Significant Synergy Opportunities and Strong Financial Profile:
CommScope expects to realize more than $150 million in annual synergies
beginning in the third year following closing, which includes more than
$50 million in the first full year. CommScope expects to drive
synergies across all areas of the company, including sales, marketing,
general and administration, operations, and research and development.
The transaction is expected to be in excess of 20% accretive 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.
Enhancing Employee Opportunities as Part of Larger Organization: TE
Connectivity’s Telecom, Enterprise and Wireless businesses will
contribute approximately 10,000 people and 65 facilities to CommScope.
This combination is expected to create an even stronger base of talent
by uniting two highly-skilled and diverse workforces with a strong
commitment to serving customers. As part of a stronger, larger company,
CommScope and TE Connectivity employees are expected to have the
opportunity to benefit from greater career and professional development
opportunities.
Management Team, Closing and Financing
Upon
completion of the transaction, Mr. Edwards, along with other members of
the CommScope executive management team, will continue to lead the
company. CommScope management will be welcoming members of the TE
Connectivity leadership team upon closing of the transaction. CommScope
corporate headquarters will remain in Hickory, North Carolina.
The
transaction is expected to close by the end of 2015 subject to
consummation of contemplated financing, regulatory approvals and other
customary closing conditions.
CommScope expects to
finance the transaction through the use of cash on hand and up to $3
billion of incremental debt, and has received debt financing commitments
from J.P. Morgan Securities LLC, BofA Merrill Lynch, Deutsche Bank and
Wells Fargo. Upon completion of the transaction, CommScope’s net debt to
2014 pro forma adjusted EBITDA ratio is expected to total approximately
4.0x to 4.5x.
Advisors
Allen &
Company LLC, J.P. Morgan Securities LLC, BofA Merrill Lynch and Deutsche
Bank are serving as financial advisors to CommScope. Alston & Bird
LLP, Latham & Watkins LLP, Baker & McKenzie and Jones Day are
serving as legal advisors to CommScope.
Conference Call and Webcast
CommScope
will host a conference call at 8:00 AM ET today, January 28, 2015, to
discuss the transaction. The conference call can be accessed by dialing
(866) 610-1072 (U.S./Canada) or (973) 935-2840 (International) and
giving the passcode 73069027. A replay of the call will be available
from January 28, 2015 at 11:00 AM ET until 11:59 PM ET on February 11,
2015 by dialing (800) 585-8367 (U.S./Canada) or (404) 537-3406
(international) and by entering the passcode 73069027. The webcast and
accompanying presentation of the conference call will be available on
CommScope’s website (www.CommScope.com) prior to the start of the call.
About CommScope
CommScope
(NASDAQ: COMM) helps companies around the world design, build and
manage their wired and wireless networks. Our network infrastructure
solutions help customers increase bandwidth; maximize existing capacity;
improve network performance and availability; increase energy
efficiency; and simplify technology migration. You will find our
solutions in the largest buildings, venues and outdoor spaces; in data
centers and buildings of all shapes, sizes and complexity; at wireless
cell sites and in cable headends; and in airports, trains, and tunnels.
Vital networks around the world run on CommScope solutions.
Forward Looking Statements
This
communication contains forward-looking statements (including within the
meaning of the Private Securities Litigation Reform Act of 1995)
concerning CommScope, the proposed acquisition by CommScope of the
Telecom, Enterprise and Wireless businesses of TE Connectivity and other
matters. These statements may discuss goals, intentions and
expectations as to future plans, trends, events, results of operations
or financial condition, or otherwise, based on current beliefs of the
management of CommScope and TE Connectivity as well as assumptions made
by, and information currently available to, such management.
Forward-looking statements may be accompanied by words such as “aim,”
“anticipate,” “believe,” “plan,” “could,” “would,” “should,” “estimate,”
“expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,”
“possible,” “potential,” “predict,” “project” or similar words, phrases
or expressions. These forward-looking statements are subject to various
risks and uncertainties, many of which are outside the control of
CommScope and TE Connectivity. Therefore, you should not place undue
reliance on such statements. Factors that could cause actual results to
differ materially from those in the forward-looking statements include
failure to obtain applicable regulatory approvals in a timely manner, on
terms acceptable to CommScope or TE Connectivity or at all; failure to
satisfy other closing conditions to the proposed transactions; the risk
that CommScope will be required to pay the reverse break-up fee under
the Stock and Asset Purchase Agreement; the risk that the TE
Connectivity businesses will not be integrated successfully into
CommScope or that CommScope will not realize estimated cost savings,
synergies and growth or that such benefits may take longer to realize
than expected; failure by CommScope to realize anticipated benefits of
the acquisition; risks relating to unanticipated costs of integration;
risks from relying on TE Connectivity for various critical transaction
services for an extended period; reductions in customer spending and/or a
slowdown in customer payments; failure to manage potential conflicts of
interest between or among customers; unanticipated changes relating to
competitive factors in the telecommunications industry; ability to hire
and retain key personnel; the potential impact of announcement or
consummation of the proposed acquisition on relationships with third
parties, including customers, employees and competitors; ability to
attract new customers and retain existing customers in the manner
anticipated; changes in legislation or governmental regulations
affecting the CommScope and the TE Connectivity businesses to be
acquired; international, national or local economic, social or political
conditions that could adversely affect CommScope, the TE Connectivity
businesses to be acquired or their customers; conditions in the credit
markets that could impact the costs associated with financing the
acquisition; risks associated with assumptions made in connection with
the critical accounting estimates, including segment presentation, and
legal proceedings of CommScope and/or the TE Connectivity businesses to
be acquired; and the international operations of CommScope and/or the TE
Connectivity businesses to be acquired, which are subject to the risks
of currency fluctuations and foreign exchange controls. The foregoing
list of factors is not exhaustive. You should carefully consider the
foregoing factors and the other risks and uncertainties that affect the
businesses of CommScope and/or the TE Connectivity businesses to be
acquired, including those described in each of CommScope’s and TE
Connectivity’s Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and other documents filed from time to
time with the Securities and Exchange Commission. Except as required
under applicable law, the parties do not assume any obligation to update
these forward-looking statements.
Contacts
Investor Contact
Phil Armstrong, CommScope
Senior Vice President, Corporate Finance
+1 828-323-4848
phil.armstrong@commscope.com
or
Media Contacts
Rick Aspan, CommScope
Vice President, Corporate Communications
+1 708-236-6568
rick.aspan@commscope.com
or
James Golden / Joe Snodgrass / Joseph Sala
Joele Frank, Wilkinson Brimmer Katcher
+1 212-355-4449
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