CommScope, a provider of infrastructure solutions for communications networks, is set to buy ARRIS International in a cash deal valued at $7.4 billion.
The combined revenue of CommScope and ARRIS will be $11.3 billion with adjusted EBITDA of $1.8 billion.
CommScope CEO Eddie Edwards was under pressure to grow the business and improve profit margins. CommScope said its CEO Eddie Edwards will continue as president and CEO of CommScope. ARRIS CEO Bruce McClelland will be joining the combined company.
ARRIS generated revenue of $6.7 billion — consisting of $3.9 billion from Customer Premises Equipment (CPE), $2.2 billion from Network & Cloud (N&C) and $568 million from Enterprise Networks (reflecting only a partial year of Ruckus since its acquisition in December 2017) — for the 12 months ended September 30, 2018.
Customer Premises Equipment (CPE) includes access devices such as broadband modems, gateways and routers and video set-tops and gateways.
Network & Cloud (N&C) includes broadband and video infrastructure with cloud-based software solutions.
Enterprise Networks includes the recently acquired Ruckus Wireless and ICX Switch businesses.
Eddie Edwards, president and chief executive officer, CommScope, said: “Through our acquisition of ARRIS, we expect to drive profitable growth in new markets, increase revenue diversity and shape the future of wired and wireless communications.”
The company expects to more than double its total product addressable market to more than $60 billion.
CommScope and ARRIS will share technical expertise with approximately 15,000 patents and approximately $800 million in average annual research and development investments.
CommScope expects to achieve annual run-rate cost savings of at least $150 million within three years post-close.
The Carlyle Group, a former CommScope owner, will have a minority stake in the company through a $1 billion equity investment, equal to approximately 16 percent of CommScope’s outstanding shares.
CommScope will remain headquartered in Hickory, NC, and the combined company will maintain a significant presence in Suwanee, GA.
CommScope reported sales of $1.15 billion for the third quarter, compared with $1.13 billion during the same period in the prior year.
CommScope generated net income of $64 million, or $0.33 per diluted share, against $51 million, or $0.26 per diluted share.
CommScope generated revenue of $731.7 million (+3.2 percent) from Connectivity Solutions and $418.7 million (–0.3 percent) from Mobility Solutions.
CommScope generated revenue of $653 million (+9.7 percent) from United States, $235.6 million (+2 percent) from EMEA, $179.3 million (–18 percent) from Asia Pacific and $59.4 million (–4.5 percent) from Latin America and $23.1 million (+6.5 percent) from Canada.