CommScope has completed its US$3 billion acquisition of TE Connectivity’s telecom, enterprise and wireless businesses, which provide fibre optic wireline and wireless broadband network solutions. The deal was first announced on 28 January 2015.
CommScope said that the transaction ‘creates a stronger company with greater innovation, employee talent and overall capabilities to serve customers in four major areas’:
• Indoor and outdoor wireless networks
• Data centres and central offices
• Connected and efficient buildings
• Access and backhaul networks.
“We are excited to move forward as one company positioned for continued success,” said Eddie Edwards, CommScope president and chief executive officer. “Together, we look to accelerate industry innovation, solve more wired and wireless network challenges, and better serve customers in more markets around the world. By uniting our complementary solutions, technologies and geographic and market coverage, we have created a stronger platform for competing successfully around the world.
“With this acquisition, we will have significant new opportunities for future sales growth and cost efficiencies to strengthen CommScope’s financial foundation. The addition of the TE businesses is expected to immediately contribute to our profitable growth,” said Edwards.
As previously announced, CommScope expects to realize more than $150 million in annual synergies in 2018, which includes more than $50 million in 2016. CommScope said it 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 in 2016 on a pro forma basis, excluding purchase accounting charges, integration costs and other special items.
The new CommScope has approximately 25,000 employees, with a more significant presence in all major geographic regions. Pro forma net sales (for the 12-month period ended 30 June 2015) were approximately $5.3 billion and pro forma adjusted EBITDA (excluding anticipated synergies) was approximately $1 billion.
The company now holds a portfolio of approximately 9,800 patents and patent applications, with research and development investment of more than $200 million a year.
For the near term, CommScope intends to run the newly-acquired TE Connectivity Broadband Network Solutions (BNS) businesses as one of its business segments, alongside the existing CommScope segments of Wireless, Enterprise and Broadband. David Redfern will continue in his current role as leader of the BNS team, reporting to CommScope chief operating officer Randy Crenshaw.
In January, CommScope said that its overall sales concentration would be more balanced following the purchase of the TE businesses based on the 12 months ending 30 September 30 2014 the adjusted sales look like this:
• Wireless—approximately 46% of sales, versus 65%;
• Enterprise—approximately 26% of sales, versus 22%; and
• Broadband Connectivity—approximately 28% of sales, versus 13%.
It also noted that with TE Connectivity’s strong presence in the Europe, Middle East, Africa and Asia Pacific regions, the combined company could be expected to meaningfully expand its footprint and global competitive position.
TE Connectivity said today (28 August) that it expects to use the majority of the proceeds from the sale for share repurchase, making the transaction neutral to adjusted earnings per share (EPS) in one year's time.
“Our strategy is focused on strengthening our leadership position in connectivity and sensor solutions, with an emphasis on harsh environment applications," said TE Connectivity chairman and CEO Tom Lynch.
"With the sale, 90% of our sales are derived from the attractive connectivity and sensor markets, and over 80% address harsh environments applications. These markets have strong underlying growth drivers as customers develop innovative products to meet the demands of a smarter, greener, safer and more connected world."