CommScope to buy Arris for $7.4bn

January 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

January 2019 Issue

In a transaction described as “a critical step in fuelling growth, shareholder value and customer benefits”, multinational network infrastructure provider CommScope is to acquire telecommunications equipment manufacturer ARRIS International plc for $7.4bn, including the repayment of debt.

An all-cash transaction for $31.75 per share, the combination of CommScope and ARRIS, on a pro forma basis, will create a company with approximately $11.3bn in revenue and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of approximately $1.8bn.

“CommScope and ARRIS will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise achieve on its own,” said Eddie Edwards, president and chief executive of CommScope. “With ARRIS, we will access new and growing markets, and have greater technology, solutions and employee talent that will provide additional value and benefit to our customers and partners.”

Furthermore, the combined company is expected to drive profitable growth in new markets, shape the future of wired and wireless communications, and position the new company to benefit from key industry trends, including network convergence, fibre and mobility everywhere, 5G, Internet of Things (IoT) and rapidly changing network and technology architectures.

“CommScope and ARRIS share a customer-first culture that emphasizes innovation, made possible by incredibly talented and experienced teams of people,” continued Mr Edwards. “As we have with numerous transactions in the past, we expect to work together with ARRIS to create a best-in-class management team and achieve a seamless integration. Together, CommScope and ARRIS will be well positioned to serve a more diverse set of customers and generate substantial value for our shareholders.”

Designing, building and managing wired and wireless networks around the world for over 40 years, CommScope has a global team of more than 20,000 employees, innovators and technologists. CommScope’s acquisition, ARRIS, is an innovator in broadband, video and wireless technology, combining hardware, software and services to enable advanced video experiences and constant connectivity across a variety of environments.

“With CommScope, we expect to further advance ARRIS’ strategy to drive innovation across our iconic brands and pioneer the standards and pathways for tomorrow’s personalised, connected always-on consumer experience,” said Bruce McClelland, chief executive of ARRIS. “We will become part of an even stronger, more global industry leader, and I look forward to working with the CommScope team to achieve great results for the combined company.”

Following completion of the acquisition, Mr Edwards will continue in his role as president and chief executive of CommScope, with Bruce McClelland and other members of the ARRIS leadership team joining the combined company.

Serving as financial advisers to CommScope are Allen & Company LLC, Deutsche Bank, J.P. Morgan Securities LLC and BofA Merrill Lynch. Alston & Bird LLP, Latham & Watkins LLP, Cravath, Swaine & Moore LLP, Pinsent Masons LLP and Skadden, Arps, Slate, Meagher & Flom LLP are serving as legal counsel. For ARRIS, Evercore is serving as financial adviser and Troutman Sanders LLP, Herbert Smith Freehills LLP and Hogan Lovells LLP are serving as legal counsel.

Mr Edwards concluded: “After a comprehensive evaluation of our business and the evolving industry we operate in, we are confident that combining with ARRIS is the best path forward for CommScope to grow and provide the greatest returns for shareholders.”

Expected to close in the first half of 2019, the CommScope/ARRIS transaction is subject to customary closing conditions, expiration or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act, receipt of certain regulatory approvals and approval by ARRIS shareholders.

Fraser Tennant