CommScope agrees to acquire ARRIS to chase growth across wireline, wireless and IoT
CommScope, which supplies and manages wired and wireless networks globally, has networking solutions for data centres and markets a portfolio of merchandise for mobile networks, has agreed to acquire ARRIS International in a deal worth $7.4 billion. Described by ARRIS CEO Bruce McClelland as \”the type of strategic opportunity that's rare in business, along with a combination that produces a business leader by any measure\”, buying creates an $11+ billion revenue company that is going to capitalise on key industry trends including network convergence, fibre and mobility everywhere, the advent of 5G, the web of products and rapidly changing networking and technology architectures. The two companies the transaction is really a critical part of fueling growth, shareholder value and customer benefits.
The Carlyle Group, a global alternative asset manager, has re-established an ownership position in CommScope through a $1 billion minority equity investment included in the financing for the transaction. It now holds 16% of existing CommScope shares. CommScope is predicting immediate operating synergies, partly through procurement, amounting to $60 million in the first full year after closing and most $125 million in year two, with ongoing savings of $150 million per annum from year three onwards.
The real focus is on growth, however, driven from a huge customer base along with a network of 10,000 channel partners. Approximately the new company will double its total addressable market for products thanks to complementary assets and capabilities. It will likewise have 15,000 combined patents and spend around $800 million in annual R&D investment as a combined entity.
Growth segments are identified as: Converged small cell solutions for licensed and unlicensed wireless spectrum; Complementary wireless and wired communications infrastructure; Integrated broadband access; Private network solutions for industrial, enterprises and public venues; and Comprehensive connected and smart home solutions.
Eddie Edwards continues as President and CEO of CommScope, with Bruce McClelland along with other members of the ARRIS leadership team joining the combined company. McClelland says from the deal: “We are excited for what this combination will deliver for our customers, partners and employees. We expect to further advance our strategy to drive innovation across our iconic brands and pioneer the standards and pathways for tomorrow’s personalised, connected, always-on buyer experience. ARRIS will end up part of a level stronger, more global industry leader.\”
He added: \”ARRIS and CommScope both believe that shaping the following era of connected communications is definitely an unprecedented global opportunity and that we each realise that to achieve our vision, we need a broader set of services and products that can help our customers achieve their set goals. We've complementary products and services. CommScope has already been a leader in communications networking, a place ARRIS has been rapidly developing. Our networking businesses – on the ARRIS and Ruckus sides – add important new options to CommScope’s current portfolio. And also the rest of ARRIS establishes a key cornerstone from the connected future.
\”ARRIS and CommScope share a deep resolve for technology excellence,\” McClelland continues. \”This is a terrific match of cultures. And that’s important because winning these new opportunities will need rich and rapid innovation.\”
ARRIS has strong leadership positions in the three segments that operates. These are: 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 programs; 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. ARRIS generated revenues of approximately $6.7 billion within the Twelve months to September 30. These break down as $3.9 billion from CPE, $2.2 billion from N&C and $568 million from Enterprise Networks (reflecting merely a partial year of Ruckus since its acquisition in December 2021).
The transaction is anticipated to close within the first 1 / 2 of 2021, subject to the satisfaction of customary closing conditions, receipt of certain regulatory approvals and approval by ARRIS shareholders.