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CommScope Wraps $7.4B Deal for Arris

Jeff Baumgartner
4/4/2019

Consolidating two major players in the wireline and wireless tech sectors, CommScope has closed its $7.4 billion acquisition of Arris.

The strategic part of the deal, announced just five months ago, has largely focused on how the combined company will be positioned for the coming 5G transition and wired/wireless network convergence.

Both companies have talked up the complementary aspects of CommScope's expertise with licensed spectrum alongside Arris's focus on unlicensed spectrum that in large part came way of its 2017 acquisition of Ruckus Wireless. Both CommScope and Arris have been working on products that support the emerging, shared 3.5GHz CBRS band. Of note, cable operators are looking at CBRS for future private LTE networks and as a way to offload traffic that can help them reduce MVNO-related costs.

In Arris, the deal also gives CommScope a top supplier to the cable industry, both on the network side and in the home. Though CommScope has been complimentary about Arris's broadband consumer premises equipment business, rumors are rampant that it will attempt to sell Arris's struggling video set-top box business.

CommScope and Arris have also claimed that the deal will produce more than $150 million in annual run-rate cost synergies in year three of the merger. CommScope hasn't announced how headcount will factor into hitting that number.

The combined company has about 30,000 employees, 15,000 patents and some $800 million in combined, average annualized R&D spending.

They also expect a 30%-plus boost in adjusted earnings per share in the first full year post-close. Some analysts believe that estimate is conservative, and think the number will hit at least 40%.

Among other deal-related moves, Arris CEO Bruce McClelland is now COO of CommScope, while Eddie Edwards will continue to head up CommScope as president and CEO. The Carlyle Group has taken a $1 billion minority stake in CommScope, and two of its execs -- Daniel Akerson and Campbell Dyer -- have been appointed to the CommScope board.

McClelland highlighted the network convergence aspects of the deal in this video interview posted to the CommScope site.

"The last connection to the consumer now is almost always wireless," he said. "So, the quality of that wireless connection, whether it's in the home or as we're out and about every day, has become crucial. And second, behind every great wireless network is a great wired network."

Edwards said integration will be a key focus over the coming year. "The first 12 months are critical in any integration. We need to make sure that we have minimal disruption to our customers," he said.

Connected to the close, trading in Arris shares was suspended. CommScope shares were up 82 cents (3.44%) to $24.69 each in Thursday morning trading.

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— Jeff Baumgartner, Senior Editor, Light Reading

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Duh!
Duh!
4/5/2019 | 4:22:32 PM
Re: History lesson
Imagine this in a John Oliver rant.
Jeff Baumgartner
Jeff Baumgartner
4/5/2019 | 11:54:58 AM
Re: History lesson
It's taken a long time, but this thing has come full circle. And that Continental reference goes waaaaay back. JB 
Duh!
Duh!
4/4/2019 | 7:01:25 PM
History lesson
Commscope spun out of Continental Cable, merged with Valtech, got bought out by MA/COM, who sold them to GI. GI split up and spun out Commscope. GI got acquired by Motorola and morphed into Motorola Connected Home. Carl Ichan broke up Motorola, and the Connected Home business went with Motorola Mobility. Motorola Mobility was acquired by Google essentially for their cell phone patents, and Google sold the Connected Home business to Arris, which sold out to...Commscope. Along the way, both Commscope and GI went public, went private, then went public again. There probably are still a few people in Horsham and Hickory who, between them, have been through every one of those transactions.

A lot of investment bankers and M&A attorneys made out on all this. Enterprise value and all the people who got laid off along the way... not so much.
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