0
General

Commscope confirms Arris takeover for USD 7.4 billion

Thursday 8 November 2018 | 13:57 CET | News

Commscope has confirmed an agreement to acquire Arris for USD 7.4 billion including debt. The deal will more than double Commscope's annual revenues, strengthening its position in the wireless market with the takeover of Ruckus Networks and expanding its addressable market to the home gateway and video delivery markets. The Carlyle Group has agreed to invest USD 1 billion for a 16 percent stake in Commscope to help finance the acquisition. 

Arris shareholders will receive USD 31.75 per share cash, a 27 percent premium on the average price in the 30 days to 23 October when rumours of a Commscope bid first emerged. Pending regulatory and Arris shareholder approval, Commscope aims to close the deal in the first half of 2019. 

Commscope expects at least USD 150 million in cost savings from the increased scale of the merged company, to be realised within three years of closing. Over USD 60 million should be realised in the first year alone, when the company's adjusted EPS will receive a 30 percent bump and Arris will add USD 1 billion in operating cash flow. 

Double revenues

Together the two companies had pro forma revenues in the year to September of USD 11.3 billion and adjusted EBITDA of USD 1.8 billion. Arris generated in the same period USD 6.7 billion in revenue, including USD 3.9 billion from CPE, USD 2.2 billion from network and cloud equipment and USD 568 million from enterprise networks (reflecting only a partial year of Ruckus since its acquisition in December 2017).

The companies expect that the combination of their wireless, wired and broadcast equipment plays into key market trends and growth segments such as converged networks, 5G and fixed wireless, private networks, smart homes and small cells. They will also have a stronger basis for R&D, with around 15,000 patents and USD 800 million in average annual spending.

In addition to Carlyle returning as a Commscope shareholder, the company has agreed USD 6.3 billion in debt financing for the deal. Upon completion of the transaction, CommScope expects net leverage of 5.1x, based on pro forma EBITDA for the year to September and expected synergies for the first year. Given the increased scale and cash flow generation, as well as both companies’ track records of successful integration, CommScope expects to rapidly deleverage to 4.0x in the second full year after closing and 2.0-3.0x in the longer term.

Commscope's Eddie Edwards will continue as CEO of the combined company, and Arris CEO Bruce McClelland and other members of the Arris leadership team will join the group. The HQ will remain in North Carolina, with a continued significant presence at Arris's base in Georgia. 

Revenues below guidance

Arris and Commscope also reported their third-quarter results with the merger announcement. Commscope posted revenues up 2 percent to USD 1.15 billion, and net profit improved to USD 64 million from USD 51 million a year ago, slightly below its guidance. 

Cost-cutting efforts will continue in Q4 and the new year amid "challenging" market conditions, especially among North American operators spending more conservatively, the company said. Commscope lowered its guidance for full-year results to revenue of USD 4.525-4.575 billion, operating profit of USD 461-484 million, EPS of USD 0.70-0.72 and operating cash flow over USD 480 million. 

Arris's revenues were also below guidance, down 4.5 percent to USD 1.65 billion. EPS was better than expected at USD 0.26, helped by its share buyback programme, but still down sharply from USD 0.47 a year ago. The company generated USD 221 million of cash from operating activities during the quarter and ended the period with USD 520 million of cash resources. Arris has spent USD 353 million in the year to date buying back shares. 



Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

Categories: General
Companies: Arris / CommScope / Ruckus Networks
Countries: World
::: add a comment
This article is part of dossier

5G


Add comment

We welcome comments that add value to the discussion. We attempt to block comments that use offensive language or appear to be spam, and our editors frequently review the comments to ensure they are appropriate. If you see a comment that you believe is inappropriate to the discussion, you can bring it to our attention by using the report abuse links. As the comments are written and submitted by visitors of the Telecompaper website, they in no way represent the opinion of Telecompaper.


Related

CommScope in talks to acquire Arris - report

Published 25 Oct 2018 13:05 CET | World
CommScope is in talks to acquire set-top box maker Arris International, in a bid to expand its product range, people familiar ...

Arris increases budget for share buybacks

Published 29 Aug 2018 14:50 CET | World
Arris has increased its budget for share buybacks to USD 725 million, more than double the previous auhorisation of USD 350 ...

Arris trims FY sales outlook after slow Q2

Published 02 Aug 2018 10:45 CET | World
Arris reported revenues in the second quarter of USD 1.727 billion, up 4 percent from a year earlier and slightly below its ...

CommScope revenues up 6% in Q2, reaffirms FY guidance

Published 31 Jul 2018 15:44 CET | World
CommScope reported revenues of USD 1.24 billion for the second quarter, up 6 percent year on year, with net profit rising to EUR ...

Arris appoints new chief for unit Ruckus Networks

Published 15 Jun 2018 09:51 CET | World
Arris has named Ian Whiting the new president of unit Ruckus Networks, from 1 July. Whiting, who will report directly to Arris ...

CommScope lowers FY guidance on lower prices in NAmerica

Published 01 May 2018 13:56 CET | World
CommScope has lowered its guidance for the full year on the bank of price reductions at certain large North American operators ...

Arris completes takeover of Ruckus Wireless

Published 04 Dec 2017 09:13 CET | World
Arris has completed its takeover of Ruckus Wireless from Broadcom and said it will continue to use the Ruckus name. Dan ...





Calendar   /   Industry Events

29 Oct ITU Plenipotentiary Conference
12 Nov Gilat Satellite Networks Q3 2018
12 Nov Play Q3 2018
12 Nov Otello Q3 2018
12 Nov YY Q3 2018
12 Nov Aviat Networks fiscal Q1
12 Nov DC5G
13 Nov Telkom fiscal H1
13 Nov Vodafone Group fiscal Q2
13 Nov 1&1 Drillisch Q3 2018
13 Nov Asus Q3 2018
13 Nov United Internet Q3 2018
13 Nov Iliad Q3 2018
13 Nov Evolving Systems Q3 2018
13 Nov Extreme Networks financial conference
13 Nov AfricaCom
14 Nov Digi Communications Q3 2018
14 Nov Multimedia Polska Q3 2018
14 Nov TDC Q3 2018
14 Nov Blonder Tongue Q3 2018
14 Nov Cisco fiscal Q1
14 Nov ProSiebenSat.1 Capital markets day
14 Nov HbbTV Symposium
15 Nov Vivendi Q3 2018
15 Nov Bouygues Telecom Q3 2018
15 Nov Nvidia fiscal Q3
16 Nov Cognizant investor day
::: More Calendar Items