Andrew Corp., which 10 months ago rebuffed a buyout bid from rival CommScope Inc., said Wednesday that it has agreed to a $15-a-share, $2.6 billion offer from the same suitor.
The two companies, which both make equipment used by cable TV and telephone carriers, said the transaction will yield “key strategic benefits,” including cost-cutting opportunities and improved operational efficiencies.
The combined company will have annual sales of $3.8 billion and a workforce of about 16,000 employees, though that number could shrink. CommScope, which will borrow significantly to complete the deal, said it intends to reduce its debt load through operating improvements “and by identifying and selectively divesting non-core or underperforming assets” in the first year after the deal closes.
Following the acquisition, CommScope will be the surviving entity, with its headquarters remaining in Hickory, N.C. Plans for Andrew’s headquarters staff in Westchester weren’t spelled out, though CommScope went out of its way to praise the efficiency of Andrew’s recently opened manufacturing center in Joliet.
This combination “creates a strong company with long-term advantages for our customers and employees,” said Andrew Chief Executive Ralph Faison.
It also underscores the consolidation trend under way among companies that provide telecommunications equipment. As the nation’s telephone companies grow bigger through mergers, they have increased their leverage with suppliers, and the telecom-industry vendors have responded with a consolidation wave of their own.
Faison has acknowledged that Andrew simply can’t grow fast enough on its own, but told the Tribune in August that “I’d always rather be a consolidator than a consolidatee.”
But Wednesday, he was praising the transaction as a deal that “provides our shareholders with a significant cash premium and offers our global employees an even more promising future. …”
Andrew has been buffeted by the consolidation in its industry. In early 2006, the company agreed to be acquired by Minnesota-based ADC Telecommunications Inc. in a deal that valued Andrew at about $2 billion. When ADC shares subsequently dropped, however, the value Andrew stockholders would have received plunged to about $1.1 billion.
At that point, CommScope appeared on the scene with an unsolicited $9.50-a-share, or $1.5 billion, bid for Andrew.
In August, Andrew directors voted to kill the agreement with ADC, and at the same meeting voted to spurn CommScope’s bid as too low.
This time, CommScope’s richer bid has the support of Andrew’s board. The deal went over reasonably well on Wall Street as well, where shares of both firms rose, Andrew’s by nearly 11 percent, to $14.40.
“Yes, love is better the second time around,” Friedman, Billings, Ramsey & Co analyst Brian Coyne told investors in a report. “While this is the second time in a year that CommScope has made a play for Andrew, the rationale for this transaction is even stronger today [because] the fundamental outlook for network infrastructure has materially improved.”
In a sense, Wednesday’s merger represents a combination of wireless and wired telecom product-makers.
Andrew is best known as a supplier of high-tech antennas, base station subsystems and related equipment used in wireless telecommunications. CommScope makes the cable and related products used in the so-called last mile of cable TV, which connects the consumer’s home to the cable system.
As a result of the accelerating convergence among cable TV, telephone, cellular and broadband services, distinctions between those communications services are eroding.
“For us, Andrew had the missing ingredient,” CommScope CEO Frank Drendel told The Associated Press. “We have the wired piece; they had the wireless piece.”
And as Faison told analysts, consumers’ “insatiable” demand for more bandwidth is generating strong demand for such products.
In contrast to the all-stock ADC deal, CommScope’s proposal is almost entirely in cash. Under terms of the accord, Andrew stockholders will receive for each of their shares $13.50 in cash and an additional $1.50 in either cash or CommScope common stock, or a combination of the two.
The transaction is expected to close by the end of this year, assuming the requisite approvals are received.
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jpmiller@tribune.com
