CommScope, Arris Nearing $5.6B Deal – Report

CommScope is close to striking an all-cash deal to acquire Arris for more than $31 per share, pinning a value of more than $5.6 billion on the company, CNBC reported Tuesday.

CNBC, citing unnamed sources said to be familiar with the M&A discussions, reported that an all-cash deal could be announced as soon as Wednesday, but warned that the agreement had yet to be signed and may not come off.

Arris Group Inc. (Nasdaq: ARRS) shares closed Tuesday at $24.97 each, up 17 cents (0.69%), then spiked about 16% in after-hours trading in the wake of CNBC's report. Arris, which has been dealing with the financial impact of US tariffs on Chinese goods, is due to report Q3 earnings on Thursday. (See Arris: Tariffs Add $200M in Broadband Gear Costs, Threaten US 5G Plans.)

CommScope Inc. has a market cap of about $4.8 billion, and acquiring Arris would more than double CommScope's size, CNBC said.

The report that Arris and CommScope are nearing a deal comes more than two weeks after Reuters reported that the two were in M&A talks. (See CommScope in Talks to Buy Arris – Report.)

If the deal comes together, it would bring further consolidation to the cable, telecom and wireless tech industry. Arris, the world's largest set-top box maker following the acquisitions of Motorola Home in 2013 and Pace in 2016, is one of the cable industry's primary vendors.

Of note, Arris and CommScope have developed complementary products to deliver services in the emerging shared CBRS band -- spectrum that cable operators have been eyeing for MVNO backhaul, private LTE networks and other use cases. (See Proposed CBRS Rules Suit Cable's Cause.)

George Notter, analyst with Jefferies & Company, suggested earlier that a deal makes "good sense for CommScope," in that it would give it more customer diversification, balance out a declining wireless end-market, and perhaps spawn a succession plan -- current CommScope CEO Eddie Edwards is 69; Arris CEO Bruce McClelland appears to be a logical candidate to step in and run a merged company.

— Jeff Baumgartner, Senior Editor, Light Reading