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CommScope today agreed to buy wireless communications specialist Andrew Corporation for $2.6 billion in mostly cash, a 16 percent premium over Andrew's closing price from Tuesday.
The deal comes more than a year after ADC failed to acquire Andrew for $2 billion, a sign that nothing is guaranteed in the highly competitive and converging market for communications gear.
Should the deal close by the end of the year as expected, CommScope will bolster its position as a provider of cables and wireless communications networking gear to help homes and business communicate through computers, phones and other gadgets.
Specifically, CommScope Chairman and CEO Frank M. Drendel said the rise in demand for video, voice, data and wireless communications -- the so-called quadruple play -- are forcing his company to provide more bandwidth for its service provider customers.
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Andrew adds the wireless component to CommScope's cable and phone networking gear, enabling it to better compete with ADC
"If you look at expanding the leadership in the last mile of distance, the combination offers all kinds of strategic rationale," Drendel said on a conference call this morning. "At the end of the day, it's all about bandwidth.... [The deal] builds on a complementary set of products and the worldwide distribution of video, voice and data mobility."
With Andrew, CommScope will offer more structured cabling for the enterprise; broadband cable and apparatus for cable television applications; and antenna and cable products, base station subsystems, coverage and capacity systems, and network gear for wireless applications.
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According to CommScope's and Andrew's financial results for 2006, the combined companies posted sales of $3.8 billion. Thirty-five percent of the sales come from wireless antenna and cable products, with 29 percent coming from carrier and network solutions, 21 percent from enterprise products and 15 percent in broadband/cable TV products.
CommScope will buy all of the outstanding shares of Andrew for $15.00 per share for at least 90 percent in cash, comprised of $13.50 per share in cash and $1.50 per share in either cash, CommScope stock, or cash and CommScope stock.
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Andrew will become a wholly-owned subsidiary of CommScope, with Drendel retaining his roles in CommScope's headquarters in Hickory, N.C. The combined company also plans to build out Andrew's manufacturing and office facility in Joliet, Ill.
The combined companies will have more than 2,200 global patents and pending patent applications and approximately 16,000 employees serving more than 130 countries.
Communications megamergers are nothing new but the high-tech world is increasingly collapsing to the point where a few large companies reign over consumers and businesses. In fact, Andrew has long been a target.
In May 2006, fiber optics giant ADC offered $2 billion for Andrew. CommScope countered with a $1.7 billion deal three months later but it didn't pan out.
Andrew responded by rejecting the CommScope deal as "inadequate" and calling off the ADC deal, paying that vendor $10 million to go away.
Interestingly, Drendel noted on the call that CommScope initially targeted Andrew 10 years ago.
"Clearly, I've always had great admiration for Andrew," Drendel added. "We tried back in '97, '98 to do a combination of Andrew and CommScope."
In other CommScope news, the company today raised second quarter guidance, saying that it expects revenue to be between $500 to $510 million. The company, which plans to announce Q2 financial results at the end of July, previously expected sales to come in between $490 to $510 million.
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