CommScope confirmed today that it has agreed to buy TE Connectivity’s telecom, enterprise and wireless businesses for roughly $3 billion. Together, the two network infrastructure giants had $5.8 billion in revenue during the fiscal year ended last September.
Investors gave the deal a standing ovation this morning, sending CommScope’s shares up 8% in early trading. Shares of TE Connectivity rose as well.
TE’s telecom, enterprise and wireless business generated $1.9 billion in revenue during the year ending in September, with $1.1 billion of that coming from TE’s telecom business, and just $164 million from wireless.
The deal will make CommScope a much stronger player in broadband connectivity, underscoring the importance of a wireline backbone in the delivery of mobile broadband. It also expands CommScope’s global presence. TE Connectivity, based in Switzerland, sells into markets around the world. Finally, the acquisition will bring CommScope approximately 7,000 patents and patent applications worldwide from TE Connectivity.
“We look forward to welcoming the TE Connectivity businesses to CommScope, which will bring top talent, strong customer relationships in growing markets and a robust pipeline of innovations,” said Eddie Edwards, CommScope president and CEO. “This transaction has many clear strategic and financial benefits for all of our stakeholders. It creates enhanced scale with a combined, diversified portfolio that we believe is well-positioned to take advantage of opportunities in the marketplace.
Distributed antenna systems may also be a driver of this deal, if it materializes. CommScope is the market leader here but TE Connectivity has been an early mover in digital DAS. AT&T, one of CommScope’s key customers, has been pushing vendors to use the CPRI interface to reduce the need for attenuation, and this aligns with TE Connectivity’s approach to DAS. The company recently completed an upgrade of the DAS at the University of Phoenix stadium, which will host the Super Bowl this weekend.
CommScope expects to finance the transaction through the use of cash on hand and up to $3 billion of incremental debt. The deal is expected to close by the end of this year.
