CommScope announced that it is proposing to acquire all of the outstanding shares of Andrew Corp. for $9.50 per share in cash. CommScope says that its all-cash proposal represents a premium of approximately 36% over the $6.97 per share value Andrew's shareholders would receive under the existing merger agreement between Andrew and ADC Telecommunications, Inc., based on the closing price of ADC's common stock on August 4, 2006, the last trading day before CommScope's proposal was made public. CommScope says its proposal also represents a premium of approximately 20% over Andrew's per share closing price of $7.89 on August 4, 2006.
The proposal, which was unanimously approved by CommScope's board of directors, is valued at approximately $1.7 billion, including assumption of approximately $186 million of Andrew net debt. According to CommScope, this represents aggregate additional consideration of approximately $404 million over the current value provided to Andrew's shareholders under the existing ADC/Andrew merger agreement.
The merger is expected to be accretive to CommScope's earnings per share in the first year after closing, excluding any related special items. Assuming a timeline set forth in a proposal letter, it is anticipated that the proposed transaction would close in early 2007.
According to a press release, CommScope expects the combined company to be a leader in "virtually every aspect of 'last mile' communications" including: structured cabling solutions for the business enterprise, broadband cable for HFC applications, and wireless communications infrastructure. The company expects to achieve annual cost savings of approximately $30 million to $50 million in the first full year after completion of the transaction, and approximately $70 million to $90 million in the second full year after completion.
"We believe that our all-cash proposal is extremely compelling for Andrew shareholders and provides Andrew shareholders superior value over that contemplated by the existing merger agreement with ADC," comments Frank Drendel, CommScope's chairman and CEO. "Under our proposal, Andrew shareholders will receive a substantial cash premium for their shares without the significant uncertainties inherent in ADC's proposed stock-for-stock merger transaction. We believe that Andrew's board of directors and shareholders will find our all-cash proposal superior to the ADC transaction."
The transaction would be financed through a combination of cash on hand and debt financing. CommScope has received commitment letters from Bank of America, N.A. and Wachovia Bank, N.A. and their respective affiliates for the financing of the transaction, which is subject to due diligence and other customary conditions.
Also, CommScope's offer is not subject to a financing condition. Upon completion of the transaction, with the anticipated free cash flow generated by the combined company and divestitures of non-core businesses, CommScope says intends to reduce the company's debt on a consistent basis.