Carlyle bets on CommScope in $2.9 bln deal

By Megan Davies and Jennifer Robin Raj

NEW YORK/BANGALORE (BestGrowthStock) – Private equity firm Caryle Group clinched a $2.9 billion deal to buy communications cable maker CommScope Inc (CTV.N: ), and analysts see little likelihood of rival bids emerging.

Carlyle (CYL.UL: ), which has a checkered history on telecoms deals, is offering $31.50 a share in cash, 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.

“We believe this scenario is unlikely given the absence of any bids thus far, the speed by which this agreement has been reached, and the $43 million break-up fee CTV would be obligated to pay if the deal were not executed,” KeyBanc analyst Anthony Kure said in a research note.

Avondale Partners analyst Blair King said that although companies like 3M Co (MMM.N: ) and Huawei (HWT.UL: ) might be interested in CommScope, he does not see any rival bids coming in.

“I think $31.50 will be well received. That is what the value of CommScope could ultimately be,” King said.

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.

CommScope shares rose 3.7 percent to $31.34 in morning trade on the New York Stock Exchange, trading below the offer price. Expectations of a deal had already been baked into the share price, as CommScope said on Monday it was in talks with Carlyle, sending its shares up 30 percent to $30.16.

Including debt, the deal is valued at $3.9 billion. JPMorgan (JPM.N: ) is providing financing for the transaction.

As of end-September, CommScope had long-term debt of $1.34 billion and cash and short-term investments of $671 million.


The deal is the latest sign of a resurgence of acquisitions by private equity firms, which are under pressure to invest billions of dollars of capital raised in the past few years.

Private equity takeovers — known as leveraged buyouts — plummeted after the credit crisis limited access to debt financing. But the financing markets have since improved enough for large deals to be struck again.

Earlier this year, Carlyle bought U.S. nutritional supplements maker NBTY Inc in a $3.8 billion deal.

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.


Some of Carlyle’s previous telecommunications deals have not fared well. 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.

CommScope said its board had approved the Carlyle deal, which is expected to close in the first quarter of 2011.

Separately, CommScope posted a third-quarter profit (Read more your timing to make a profit.) that beat market estimates and said popular devices like smartphones and tablet PCs have created demand for mobile Internet despite a tough global economy.

(Additional reporting by Anil D’Silva and S. John Tilak in Bangalore and Nadia Damouni in New York; Editing by Ian Geoghegan, Gopakumar Warrier and John Wallace)

Carlyle bets on CommScope in $2.9 bln deal