CommScope to Buy TE Connectivity Unit for $3 Billion

Posted by on 10 March 2015

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The CommScope Holding Company, a telecommunications equipment maker, has agreed to buy a unit of TE Connectivity for $3 billion in cash, in a bet on consumers’ continuing hunger for communicating over data networks.

CommScope, which makes equipment for wireless operators to bolster their networks, as well as connectivity products for data centers, said the deal would add to its existing business and help it expand in Europe, the Middle East and Asia. The TE Connectivity unit it is acquiring makes fiber optic cables and other equipment for telecommunications, enterprise and wireless networks.

Shares of CommScope rose about 9 percent in morning trading on Wednesday, giving the company a market capitalization of $5.2 billion. TE Connectivity shares rose 7 percent, for a market capitalization of $28.1 billion.

The deal centers on the infrastructure that powers the age of mobile devices and constant connectivity. CommScope, which is headed by Marvin S. Edwards Jr., is essentially hoping to increase its capacity to carry these signals over its networks.

“Any time you want to talk or communicate,” Mr. Edwards, who is known as Eddie, said in an interview, “we provide the solutions and products to enable that to happen.”

TE Connectivity, for its part, said the deal would allow it to focus more on its sensor technology business, particularly when it comes to so-called harsh environments like the ocean floor or the bottom of a mine.

The unit it is selling, known as broadband network solutions, generated revenue of $1.9 billion in its 2014 fiscal year. CommScope said it expected the deal to generate at least $150 million in annual savings in the third year after it closes.

CommScope, which had its public market debut in 2013, is still controlled by the Carlyle Group, the private equity firm that bought it for $3 billion in 2010. It is based in Hickory, N.C.

CommScope, which is aiming to close the deal by the end of this year, said it planned to use up to $3 billion of debt to finance the transaction. In theory, that means the entire price could be financed through debt.

Allen & Company, JPMorgan Chase, Bank of America and Deutsche Bank are providing financial advice to CommScope, while Alston & Bird; Latham & Watkins; Baker & McKenzie; and Jones Day are its legal advisers.

Centerview Partners, Goldman Sachs and Citigroup are the financial advisers for TE Connectivity, while Simpson Thacher & Bartlett; Allen & Overy; and Sutherland Asbill & Brennan are its legal advisers.


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