HICKORY – CommScope is buying Georgia-based Arris in a deal the firms value at some $7.4 billion. But there’s also much more news: The Carlyle Group, a private equity firm, is investing $1 billion in CommScope as part of the deal’s financing.
However, Wall Street investors don’t like the deal. CommScope (Nasdaq: COMM) shares plunged 20 percent, or more than $5, to $19.56 on Thursday after the deal was announced.
CommScope’s CEO will run the combined venture.
The deal helps CommScope prepare for the advent of faster 5G service to the wireless market.
Arris makes modems and boxes for the wireless industry, including cable operators. Equipment makers and telecommunications companies like Verizon are all gearing up for 5G, which is expected to allow for higher and faster data rates and better connections between multiple devices.
That deal provides Caryle with an ownership stake in the company, a “re-established” position since Carlyle has been a previous CommScope backer.
CommScope will pay $31.75 per share for Arris in an all-cash transaction, which was announced early Thursday.
Shares in Arris (Nasdaq: ARRS) surged more than 11 percent to $27.79 in pre-market trading after closing at $24.97 on Wednesday. Shares surged 10 percent Thursday to close at $30.68.
CommScope Arris deal
CommScope shares initially slipped 27 cents to $24.49.
CNBC first reported the deal earlier this week.
Both firms are telecommunications infrastructure gear providers.
If the deal is approved, the combined company would have more than $11 billion in combined revenue.
“A deal would give CommScope more scale with a more diversified product base, while it would provide an exit for Arris as fewer customers watch traditional TV from set-top boxes, a major part of its business,” CNBC reported.
The deal also basically double the market capitalization of CommScope to some $10 billion, the network said.
CommScope is based in Hickory.
“After a comprehensive evaluation of our business and the evolving industry we operate in, we are confident that combining with ARRIS is the best path forward for CommScope to grow and provide the greatest returns for shareholders,” said Eddie Edwards, chief executive officer of CommScope., in a statement.
“CommScope and ARRIS will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise achieve on its own. With ARRIS, we will access new and growing markets, and have greater technology, solutions and employee talent that will provide additional value and benefit to our customers and partners.
“CommScope and ARRIS share a customer-first culture that emphasizes innovation, made possible by incredibly talented and experienced teams of people. As we have with numerous transactions in the past, we expect to work together with Bruce McClelland and the ARRIS team to create a best-in-class management team and achieve a seamless integration. Together, CommScope and ARRIS will be well positioned to serve a more diverse set of customers and generate substantial value for our shareholders.”
Caryle’s investment is equivalent to 16 percent of CommScope’s outstanding shares, CommScope noted.
equal to approximately 16 percent of CommScope’s outstanding shares.
“We are delighted to resume our collaboration with CommScope’s accomplished management team,” said Cam Dyer, Carlyle managing director and global co-head of Technology, Media and Telecom, in the announcemented. “We believe in the company’s long-term strategy, customer-centric culture and ability to deliver results. This optimism has fueled our desire to be a part of such a promising transaction with Arris.”
The Associated Press contributed to this story.
