Carlyle Group takes CommScope to private in $3B buyout
The Carlyle Group has a checkered history in telecoms deals, notes a Reuters report.
CommScope, Inc. (NYSE: CTV) announced yesterday it had, after a period of speculation, struck a definitive merger agreement with alternative asset manager The Carlyle Group via which Carlyle will acquire all of the outstanding shares of CommScope common stock for $31.50 per share in cash. The total transaction is valued at approximately $3.9 billion andwill transform CommScope from a public to a private company.
The transaction is expected to close in the first quarter of 2011.
Reuters reports that analysts see little likelihood of rival bids emerging for the communications cable maker. The offer by Carlyle CYL.UL -- which Reuters notes has a checkered history in telecoms deals -- of $31.50 a share in cash is a premium of 36 percent to CommScope's closing price on Friday. CommScope has a "go-shop" period until December 5, during which rival bidders can submit offers.
Carlyle has a long history with CommScope and said in a press release it had known senior members of the company's management for many years. Carlyle said equity financing for the CommScope deal would come out of two of its funds -- Carlyle Partners V, a $13.7 billion U.S. buyout fund, and Carlyle Europe Partners III, a 5.4 billion euro European buyout fund.
The Carlyle Group is a global alternative asset manager with $90.9 billion of assets under management committed to 66 funds as of June 30, 2010. It invests across three asset classes – private equity, real estate and credit alternatives – in Africa, Asia, Australia, Europe, North America, and South America. The investments focus on aerospace and defense, automotive and transportation, consumer and retail, energy and power, financial services, healthcare, industrial, infrastructure, technology and business services, and telecommunications and media.
Some of Carlyle's previous telecommunications deals have not fared well, noted Reuters. The firm acquired debt-laden Hawaiian Telecom in 2005 for $1.6 billion from Verizon Communications. Three years later, the Hawaiian provider of local and long-distance telephone service filed for bankruptcy.
“We are proud to enter into this agreement with Carlyle and believe this transaction is in the best interest of CommScope and our stockholders,” said Frank Drendel, chairman of the board and chief executive officer, CommScope. “After careful and thorough analysis, together with our independent advisors, our board of directors unanimously approved this transaction with Carlyle, which has a strong reputation and global network, and a proven record of success in acquiring and guiding companies like CommScope.”
Eddie Edwards, CommScope’s president and chief operating officer, said, “As a private company, we believe CommScope will have greater flexibility to focus on our long-term strategic direction as a global leader in infrastructure solutions for communications networks. Carlyle understands our industry and our business well, and will be a tremendous asset as we build upon our leadership position and continue to implement our strategic plan to deliver enhanced value to our customers around the world.”
Drendel, Edwards, and other members of CommScope’s executive management team are expected to stay in leadership positions after the transaction closes.
Bud Watts, managing director and head of Carlyle’s Technology Group, said, “We’ve known Frank, Eddie, and other senior leaders at CommScope for many years. We have the greatest respect for them, CommScope’s many talented employees, and the business they have built together. CommScope has a clear strategy, a culture of operational excellence and strong commitments to its employees, customers and partners around the world. We look forward to working with the ‘One CommScope’ team as it pursues the next phase of the company’s growth.”
CommScope expects to hold a Special Meeting of Stockholders to consider and vote on the proposed merger and merger agreement as soon as practicable after the mailing of the proxy statement to its stockholders.
The transaction is subject to the approval of CommScope’s stockholders, regulatory approvals and other customary closing conditions. The transaction has fully committed financing and is not subject to any condition with regard to the financing. Equity financing will be provided by Carlyle Partners V, a $13.7 billion U.S. buyout fund, and Carlyle Europe Partners III, a €5.4 billion European buyout fund; debt financing will be provided by J.P. Morgan.