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Arris Flirted With Handful of Potential Suitors

Jeff Baumgartner
12/3/2018
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August 2018: CommScope & Arris get serious
On Aug. 15, 2018, Drendel informed Stanzione that CommScope was again interested in a merger, and that resulted in a new NDA and CommScope's thoughts on the strategic merits of the deal. Due diligence on both sides got underway.

On August 24, an in-person meeting was held, followed by CommScope's submission of additional questions about Arris focusing on consumer premises equipment, capital expenditures and Arris financials that was supplied by early September. The full board of Arris was informed of CommScope's renewed interested at a special meeting held on September 24 that was called primarily for other purposes.

On September 12, CommScope put forth a non-binding written proposal to acquire 100% of Arris ordinary shares for a mix of cash and CommScope stock that would have represented $30 per share, and a 14.2% premium to Arris's closing price on Sept. 12 of $26.26 per share.

The Arris board held a special meeting on September 16 to discuss CommScope's preliminary proposal, after which McClelland informed CommScope's Edwards that Arris wanted a better offer – Arris's analysis, McClelland said, found that the value that Arris brought to CommScope supported a higher valuation of Arris shares.

On September 19, CommScope submitted more requests to Arris focused on CPE and Enterprise market trends, and tax implications on a possible merger were discussed a week later. Further discussions also dug into the business effects from the US tariffs on certain Chinese goods. (See Sale of Arris Set-Top Box Biz 'On the Table' for CommScope – Analyst , US, China Agree to Delay Tariffs Hike and Arris: We're Tackling the Tariffs.)

CommScope, on October 11, submitted a revised non-binding written offer of $31.50 per share in all cash, a 37.9% premium on Arris's closing price on October 11. The Arris board met again on October 13 to consider the new offer, and Arris again asked for a higher offer price. Edwards then made an offer of $31.75 per share in all-cash, subject to the completion of due diligence.

Stories of a possible deal between CommScope and Arris surfaced on October 24, which caused Arris to ask Evercore to engage with the UK Takeover Panel. The Panel agreed with Arris that the takeover code would not apply to the proposed Arris-CommScope transaction. In turn Evercore informed Sponsor B that they could not comment on the "rumor." (See CommScope in Talks to Buy Arris – Report.)

On November 6, a report surfaced that a potential deal would involve an offer from CommScope for Arris above $31 per share. In response, Evercore informed Sponsor C that they could not comment on the rumor. (See CommScope, Arris Nearing $5.6B Deal – Report .)

The Arris board held another special meeting on November 7 in Atlanta to provide an update on the discussions and recommended that shareholders approve the deal on the table. CommScope told Arris on that date that its board had approved the transaction.

CommScope and Arris issued a joint press release announcing the deal the morning of November 8 for $31.75 per share. They expect the transaction to close in the first half of 2019. (See CommScope to Buy Arris for $7.4B.)

— Jeff Baumgartner, Senior Editor, Light Reading

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