CommScope agrees to acquire TE Connectivity's Telecom, Enterprise and Wireless businesses

CommScope Holding Company (NASDAQ: COMM) has agreed to acquire TE Connectivity's (NYSE: TEL) Telecom, Enterprise and Wireless businesses in an all-cash transaction valued at approximately $3 billion. The transaction, which was approved by the boards of directors of both companies, is expected to accelerate CommScope's strategy to drive profitable growth by entering into attractive adjacent markets and to broaden its position as a leading communications infrastructure provider. In addition, CommScope will have greater geographic and business diversity following the completion of the transaction.

The Telecom, Enterprise and Wireless businesses of TE Connectivity, a world leader in fibre optic connectivity for wireline and wireless networks, generated annual revenues of approximately $1.9 billion in its fiscal year ended 26 September 2014, consisting of $1.1 billion from its Telecom business, where it is a world leader; $627 million from Enterprise; and $164 million from Wireless. The combined company's pro forma results for the twelve months ended 30 September 2014 would have been approximately $5.8 billion in net sales and $1.2 billion in pro forma adjusted EBITDA. The transaction is expected to be in excess of 20% accretive to CommScope's adjusted earnings per share by the end of the first full year after closing and on a pro forma basis, excluding purchase accounting charges, transition costs and other special items.

"This is an important and transformative acquisition for CommScope, bringing together complementary geographic and customer coverage, products and technologies for the benefit of our stockholders, customers and employees," said Eddie Edwards, CommScope president and chief executive officer. "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.

"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. CommScope has a strong track record of disciplined strategic acquisitions and successful integrations, and we look forward to working with the TE Connectivity team to bring these assets together as cohesively and expeditiously as possible."

"CommScope is a proven industry leader, and we believe it is the right company to lead our Telecom, Enterprise and Wireless businesses forward," said Tom Lynch, TE Connectivity chairman and chief executive officer. "Our dedicated employees have been instrumental in the success of these businesses, and we are confident in their ability to continue to deliver. We look forward to working closely with the CommScope management team to close the transaction."

Transaction expected to position CommScope for future growth and value creation through:

* establishing leading positions across diverse and growing product segments and geographies: This transaction is expected to provide CommScope with the opportunity to expand into the adjacent wireline telecom networks/fibre-to-the-X (FTTx) market and meet the steadily growing demand for broadband services in developed and emerging markets. Upon completion of the transaction, CommScope's overall sales concentration would be more balanced based on the 12 months ending 30 September 2014:

* Wireless ? approximately 46% of sales, versus 65%;
* Enterprise ? approximately 26% of sales, versus 22%; and
* Broadband connectivity ? approximately 28% of sales, versus 13%.

Furthermore, with TE Connectivity's strong presence in the Europe, Middle East, Africa and Asia Pacific regions, the combined company is expected to meaningfully expand its footprint and global competitive position.

* Significantly expanding platform for innovative solutions: The transaction is expected to substantially expand CommScope's foundation of innovation with the addition of approximately 7 000 patents and patent applications worldwide from TE Connectivity. Further, TE Connectivity's leading fibre technology is expected to help CommScope better address a transition to fibre deployments deeper into networks and data centres as consumers and businesses generate increasing bandwidth requirements. With these additional innovative solutions, CommScope expects to solve more customer communications challenges, while providing greater opportunities to its business partners.
* Creating complementary market opportunities: The combined company is expected to have the technology, solutions and talent to provide greater value and a broader range of services to its customers and partners. Additionally, TE Connectivity's existing relationships with key industry participants are expected to enable the combined company to meaningfully strengthen its position across multiple markets.
* Offering significant synergy opportunities and strong financial profile: CommScope expects to realise more than $150 million in annual synergies beginning in the third year following closing, which includes more than $50 million in the first full year. CommScope expects to drive synergies across all areas of the company, including sales, marketing, general and administration, operations, and research and development. The transaction is expected to be in excess of 20% accretive by the end of the first full year after closing and on a pro forma basis, excluding purchase accounting charges, transition costs and other special items.
* Enhancing employee opportunities as part of larger organisation: TE Connectivity's Telecom, Enterprise and Wireless businesses will contribute approximately 10,000 people and 65 facilities to CommScope. This combination is expected to create an even stronger base of talent by uniting two highly-skilled and diverse workforces with a strong commitment to serving customers. As part of a stronger, larger company, CommScope and TE Connectivity employees are expected to have the opportunity to benefit from greater career and professional development opportunities.

Management team, closing and financing

Upon completion of the transaction, Mr Edwards, along with other members of the CommScope executive management team, will continue to lead the company. CommScope management will be welcoming members of the TE Connectivity leadership team upon closing of the transaction. CommScope corporate headquarters will remain in Hickory, North Carolina.

The transaction is expected to close by the end of 2015 subject to consummation of contemplated financing, regulatory approvals and other customary closing conditions.

CommScope expects to finance the transaction through the use of cash on hand and up to $3 billion of incremental debt, and has received debt financing commitments from JP Morgan Securities, BofA Merrill Lynch, Deutsche Bank and Wells Fargo. Upon completion of the transaction, CommScope's net debt to 2014 pro forma adjusted EBITDA ratio is expected to total approximately 4.0x to 4.5x.

Advisors

Allen & Company, JP Morgan Securities, BofA Merrill Lynch and Deutsche Bank are serving as financial advisors to CommScope. Alston & Bird, Latham & Watkins, Baker & McKenzie and Jones Day are serving as legal advisors to CommScope.

Conference call and Web cast

CommScope will host a conference call at 8:00 AM ET today, 28 January, 2015, to discuss the transaction. The conference call can be accessed by dialling (866) 610-1072 (US/Canada) or (973) 935-2840 (International) and giving the passcode 73069027. A replay of the call will be available from 28 January, 2015 at 11:00 AM ET until 11:59 PM ET on 11 February, 2015 by dialling (800) 585-8367 (US/Canada) or (404) 537-3406 (international) and by entering the passcode 73069027. The Web cast and accompanying presentation of the conference call will be available on CommScope's Web site (www.CommScope.com) prior to the start of the call.