CommScope buy expands LAN plans
CommScope Inc. will put up $263 million in cash and stock to acquire the Connectivity Solutions (ACS) division of Avaya Inc.
CommScope said the deal will give it a solid foothold in the global enterprise LAN sector, complementing its current position as a major supplier of coax and fiber to cable companies. Avaya's ACS division also provides structured cabling and equipment for telephony central offices and environmental enclosures for telecom applications.
The acquisition stands to almost double CommScope's revenue output. ACS had revenues of $542 million for the fiscal year ended Sept. 30, 2003, compared to the $555 million CommScope generated during the same period.
Under the deal, CommScope will pay $210 million in cash, give Avaya an $18 million convertible subordinated note and offer $34.9 million in CommScope common stock. CommScope will also assume up to $75 million in ACS debt, and expects to incur transition costs of roughly $25 million during the first year of operating the ACS business.
"ACS is an excellent strategic fit and a logical step in the continued growth and development of CommScope as we execute our last-mile strategy," said Frank Drendel, CommScope's chairman and CEO, in a statement. "This transaction represents a unique opportunity to acquire a preeminent industry player at an attractive valuation and establish CommScope as a global leader in the enterprise LAN area."
Citing stronger demand for broadband video products, CommScope also reported Q3 sales of $148.7 million, up from $147.8 million a year ago, and a net loss of $19.6 million (32 cents per share). The reported loss included non-cash impairment charges of 26 cents per share related to "underutilized or idle" production gear and a 10 cent per share after-tax equity in losses tied to OFS BrightWave, an optical fiber venture between CommScope and Japan-based Furukawa Electric Co.
Despite the sales rise in the seasonally strong third quarter, CommScope said it expects Q4 sales to drop 5 percent to 10 percent.