TE Connectivity to sell network business to CommScope for $3B

TE Connectivity made it official that it has reached an agreement to sell its telecom and data equipment business to CommScope for $3 billion.

After meeting customary financing, regulatory approvals and other customary closing conditions, CommScope expects to close the transaction by the end of 2015.

TE Connectivity, which was once part of Tyco International, builds connectivity and sensor products for a host of vertical markets, including telecom, automotive, aerospace and energy.

"This is an important and transformative acquisition for CommScope, bringing together complementary geographic and customer coverage, products and technologies for the benefit of our stockholders, customers and employees," said Eddie Edwards, CommScope president and CEO, in a release. "This transaction has many clear strategic and financial benefits for all of our stakeholders. It creates enhanced scale with a combined, diversified portfolio that we believe is well-positioned to take advantage of opportunities in the marketplace."

TE's Broadband Network Solutions business unit consists of TE's Telecommunications, Enterprise Networks and Wireless businesses. The unit had revenue of $1.9 billion in the 2014 fiscal year. The unit is one of the market leaders in providing fiber-optic connectivity for wireline and wireless networks. Wireless was the smallest component of the $1.9 billion, at $164 million, with $1.1 billion going to the wireline telecom business and $627 million in the enterprise segment. CommScope, whose operations now are heavily tilted toward designing, building and managing wireless networks, will have a more balanced product portfolio after the deal closes. CommScope said that if the transaction were included in its results, its overall sales, based on the 12 months ending Sept. 30, 2014, would be 46 percent wireless-based compared to 65 percent beforehand. The deal should boost CommScope's offerings for data centers and short-range wireless transmissions, Bloomberg noted.

CommScope also said it expects the acquisition of TE Connectivity's assets will enable it to expand into the adjacent wireline telecom networks/fiber-to-the-X (FTTx) market and meet the steadily growing demand for broadband services in developed and emerging markets.

In addition to bolstering its product portfolio, acquiring TE Connectivity's telecom and data equipment business will enhance its geographic reach in Europe, Middle East, Africa and Asia-Pacific.

Meanwhile, it appears that TE Connectivity will retain its subsea fiber operation, which builds submarine fiber cable networks for both the telecom and oil and gas industries. According to TE Connectivity's annual report, the subsea communications unit made up 2 percent of the company's net sales in fiscal 2014.

In the subsea cable market, TE Connectivity competes directly with Alcatel-Lucent (NYSE: ALU), which plans to take the unit public during the first half of this year.

CommScope itself was purchased by private equity firm the Carlyle Group for $3.9 billion in 2010. Later in 2013, the company went public and Carlyle still owned a 54 stake in the company as of September 2014.

For more:
- see the release
- WSJ has this article
Bloomberg has this article

Related articles:
CommScope to go private with Carlyle Group buyout
Carlyle Group working out $3 billion bid for CommScope
CommScope buys Andrew for $2.6B 
CommScope owner Carlyle mulls IPO for company

This article was updated on Jan. 28 to reflect the fact that CommScope confirmed the deal.

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