CommScope and Furukawa Electric enter into joint ventures
CommScope Inc. (www.commscope.com) will partner with Furukawa Electric Co. Ltd. of Japan to acquire the fiber-optic cable business of Lucent Technologies
CommScope Inc. (www.commscope.com) will partner with Furukawa Electric Co. Ltd. of Japan to acquire the fiber-optic cable business of Lucent Technologies. The transaction will enhance CommScope's technology platform with intellectual property and research and development, expand its channel access by adding complementary capabilities, and provide it with a strategic position in fiber-optic manufacturing.
"While these are challenging times, we are confident that there are exceptional long-term opportunities in the global fiber-optic and coaxial cable markets as applications for broadband communications continue to grow throughout the world," said Frank M. Drendel, chairman and CEO of CommScope.
CommScope and Furukawa will enter into two joint ventures, one for the fiber cable portion of Lucent's optical-fiber business and one for the transmission fiber portion of the same business. This partnership is designed to supply customers with an end-to-end cabling solution. "Customers will be able to go to one source for their long-distance as well as 'last mile' solution needs," explained Betsy Lambert, manager, CommScope corporate communications.
CommScope is a manufacturer of coaxial and optical-fiber cable, but it has no expertise in the area of making glass for transmission fiber. Furukawa will have controlling interest in the transmission fiber portion since this is where it has experience. Since CommScope's experience revolves around manufacturing the actual cable, it will have controlling interest in this venture.
CommScope will own 51% of the fiber cable joint venture, which includes transmission fiber and cable manufacturing capabilities at a 2.9 million square-foot facility in Norcross, GA, as well as facilities in Germany, Brazil, and a joint venture in Russia. In addition, the cable joint venture will include Lucent's 51% interest in Fitel, a joint venture between Lucent and Furukawa that produces high-performance loose-tube cable. The transmission fiber joint venture will be 49% owned by CommScope, with Furukawa owning a 51% interest, and will be accounted for by CommScope using the equity method. This transmission fiber joint venture includes the Multimode Optical Fiber Center of Excellence in Sturbridge, MA, which develops and manufactures graded-index multimode optical fibers, as well as Litespec, a joint venture between Lucent and Sumitomo Electric Lightwave Corp. that manufactures singlemode optical fiber.
Officials believe Lucent's facilities and capabilities will be beneficial to CommScope and Furukawa from an operating perspective. "We're excited to jointly own and operate Lucent's state-of-the-art facilities, which will further enhance CommScope's world-class manufacturing capabilities, and is expected to provide us with significant operating synergies through the experienced management teams and highly skilled workforce," said Drendel. "We believe we will be able to drive efficiencies and save costs by sharing our respective manufacturing processes and techniques."
This is seen as an effort to build a strong relationship with the employees of Lucent's optical-fiber cable busi nesses. Furukawa, CommScope, and employees of Lucent will host a combination of on-the-job and classroom training to achieve operating unity throughout the ventures.
For its ownership in the two joint ventures, CommScope will invest approximately $650 million in a combination of debt and equity. CommScope management believes that the transaction will be accretive to the company's earnings in the first full year, excluding one-time, transition-related charges. The transaction, which is subject to various regulatory approvals and other usual closing conditions, is expected to close by the end of this month.
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