CommScope Crashes ADC's Party

Cable access gear vendor CommScope has trumped ADC by tabling a higher bid for wireless equipment firm Andrew Corp.

August 8, 2006

2 Min Read
CommScope Crashes ADC's Party

The impending acquisition of wireless equipment firm Andrew by ADC (Nasdaq: ADCT) has been interrupted by cable access equipment vendor CommScope Inc. , which tabled a more lucrative bid for Andrew on Monday.

In late May, ADC announced an all-stock offer worth about $2 billion for Andrew, and the acquisition process has been ongoing since then. (See ADC to Buy Andrew for $2B and ADC, Andrew Make Progress.)

When ADC announced its offer in late May, its stock was worth $22.38. However, investors didn't like the deal, and ADC has since lowered its third quarter and full year guidance, sending its share price into freefall. At the end of last week, it stood at $12.22. (See ADC Updates on Q3, Full Year.)

Enter CommScope, which supplies coaxial cable and the associated access nuts and bolts to cable operators and large enterprises. It reckons it would fit well with Andrew, which makes all manner of wireless access equipment, such as antennas, power amplifiers, transmission towers, as well as integration and support services. CommScope said combining the two companies would create "a global leader in providing solutions for the 'last mile' of communications networks."

So on Monday it offered $9.50 in cash for each Andrew share -- a premium of about 20 percent on Andrew's share price before trading began Monday -- and said it would assume Andrew's net debt of $186 million, valuing its offer at about $1.7 billion, way higher than the $1.14 billion current value of ADC's offer.

Not surprisingly the news sent Andrew's stock up $1.67, more than 21 percent, to $9.56 on Monday.

The arrival of a rival and more lucrative alternative bid also cheered ADC's investors, who clearly aren't that happy with the Andrew acquisition plan. ADC's share price rose $0.55, about 4.5 percent, to $12.77 on Monday.

CommScope reckons a takeover of Andrew would be accretive to its earnings in the first year after a takeover (excluding one-off costs), and that it could save between $30 million and $50 million in operating costs in the first year and between $70 million and $90 million in the second year.

But its investors aren't so keen. CommScope's share price fell Monday by $2.16, more than 7 percent, to $28.00.

It seems neither ADC's nor CommScope's bids are good enough for some Andrew investors. Sam Shapiro, president of Shapiro Capital Management, ADC's second biggest single shareholder with just over 6 percent of its stock, told Bloomberg that he thought Andrew's shares are worth at least $12 in cash.

— Ray Le Maistre, International News Editor, Light Reading

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