Andrew Corp.’s merger-and-acquisition adventures skidded to a full stop last week as the company pumped its brakes on potential deals with both ADC Telecommunications Inc. and CommScope Inc.-preferring instead to go it alone.
Andrew announced in May a merger with ADC, but on Aug. 7, CommScope shook up the deal with an unsolicited takeover bid to steal Andrew away from ADC. Just three days later, on Aug. 10, Andrew canceled thoughts of any M&A deals with plans to continue operating as an independent company.
Andrew and ADC said they mutually agreed to terminate their merger agreement after negative Wall Street reactions to the merger “raised serious questions” about whether the deal could gain shareholder approval.
Though the companies agreed to break things off “without liability to either party,” Andrew agreed to pay ADC $10 million and said it would pay another $65 million if it merged with another company within 12 months.
“While we still believe in the convergence strategy, the merger of Andrew and ADC was only one method to execute against that,” said Ralph Faison, Andrew’s chief executive officer. “We are confident in our ability to address the current and future needs of our customers and shareholders as an independent company.”
As for CommScope’s proposal-in which the company sought to acquire Andrew for $9.50 per share, a premium of 36 percent above ADC’s $6.97 per share offer-Andrew said the offer was inadequate and not in the best interest of Andrew’s shareholders.
“The board carefully reviewed and considered CommScope’s proposal and found it does not adequately reflect the value of Andrew, its business prospects, and its industry-leading products, global customer base and skilled global workforce,” Faison said.
As news of Andrew’s announcement hit Wall Street Thursday morning, Andrew’s stock fell to $8.75 per share. ADC’s stock rose by $1.18 per share to $13.83, while CommScope’s shares fell 6 cents to $28.11 per share.
In the announcement terminating its M&A activities, Andrew seemed confident about its future, saying, “As evidenced by our record sales and orders in our fiscal third quarter, we are growing share and improving operations through innovative products and the hard work of our global team.”
“We are disappointed that Andrew has decided to reject our proposal,” CommScope said in a statement. “CommScope’s operational excellence and financial discipline has made us a global leader in the `last mile’ of telecommunications. We intend to continue building upon our leadership position and we are confident that CommScope is poised to continue creating value for its stockholders.”
In late July, Andrew reported declining fiscal third-quarter net profits as the company stretched itself financially to cover restructuring costs in preparation for its proposed merger with ADC. Profits for the quarter fell from last year’s $13 million to this year’s $7 million, while revenues grew from last year’s $487.2 million to this year’s $550.7 million. The company forecast fourth-quarter sales to land between $540 million and $570 million, due largely to continued strong sales of wireless infrastructure gear.
