CommScope agreed to acquire ARRIS International (NASDAQ: ARRS) in an all-cash transaction for $31.75 per share, or a total purchase price of approximately $7.4 billion, including the repayment of debt. In addition, The Carlyle Group, a global alternative asset manager, has reestablished an ownership position in CommScope through a $1 billion minority equity investment as part of CommScope’s financing of the transaction.
ARRIS, an innovator in broadband, video and wireless technology, combines hardware, software and services to enable advanced video experiences and constant connectivity across a variety of environments – for service providers, commercial verticals, small enterprises and the people they serve. ARRIS has strong leadership positions in the three segments in which it operates:
- Customer Premises Equipment (CPE), featuring access devices such as broadband modems, gateways and routers and video set-tops and gateways;
- Network & Cloud (N&C), combining broadband and video infrastructure with cloud-based software solutions; and
- Enterprise Networks, incorporating the recently acquired Ruckus Wireless and ICX Switch businesses, and focusing on wireless and wired connectivity, including Citizens Broadband Radio Service solutions.
- For the 12 months ended September 30, 2018, ARRIS generated revenues of approximately $6.7 billion, consisting of $3.9 billion from CPE, $2.2 billion from N&C and $568 million from Enterprise Networks (reflecting only a partial year of Ruckus since its acquisition in December 2017).
The combination of CommScope and ARRIS, on a pro forma basis, would create a company with approximately $11.3 billion in revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $1.8 billion, based on results for the two companies for the 12 months ended September 30, 2018.
CommScope said the combined company will drive profitable growth in new markets, shape the future of wired and wireless communications, and position the new company to benefit from key industry trends, including network convergence, fiber and mobility everywhere, 5G, Internet of Things and rapidly changing network and technology architectures.
“After a comprehensive evaluation of our business and the evolving industry we operate in, we are confident that combining with ARRIS is the best path forward for CommScope to grow and provide the greatest returns for shareholders,” said Eddie Edwards, president and chief executive officer, CommScope. “CommScope and ARRIS will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise achieve on its own. With ARRIS, we will access new and growing markets, and have greater technology, solutions and employee talent that will provide additional value and benefit to our customers and partners.
Separately, CommScope reported 3Q18 sales of $1.15 billion, up 2% year over year. GAAP operating income was $132 million and non-GAAP adjusted operating income (excluding special items) was $219 million.
Sales increased 2 percent year over year as growth in the North America and the Europe, Middle East and Africa (EMEA) regions more than offset lower sales in the Asia-Pacific region. Double-digit Outdoor Network Solutions growth, was partially offset by a decline in Indoor Copper. Foreign exchange rate changes unfavorably impacted net sales by approximately 2 percent.
“During the quarter, we took action to ensure CommScope successfully navigates a dynamic and challenging market environment,” said President and Chief Executive Officer Eddie Edwards. “While we expect headwinds to continue as certain North American service providers spend more conservatively over the near term, we are confident that with ARRIS we will be better positioned for the advent of 5G and fixed wireless access.”
ARRIS completes acquisition of Ruckus Wireless
ARRIS completed its previously-announced acquisition of the Ruckus Wireless and ICX Switch business from Broadcom.
When the deal was first announced in February 2017 the announced price was $800 million in cash, plus the additional cost of unvested employee stock awards, following the closing of Broadcom’s acquisition of Brocade.
Ruckus Networks will operate as a dedicated business under Enterprise Networks. Its target vertical markets span hospitality, education, government, service providers, multi-dwelling / tenant units, sports / entertainment venues, and transportation centers. ARRIS said another opportunity for Ruckus is the small-cell CBRS LTE market.
Dan Rabinovitsj—previously COO of Ruckus Wireless—will lead a new ARRIS Enterprise Networks business segment.
The business will focus on the delivery of innovative, high-performance wireless and wired network infrastructure, with a robust channel-led sales strategy.