CommScope (NASDAQ:COMM) has completed its acquisition of ARRIS (NASDAQ:ARRS). The deal was first announced last November.
The acquisition is intended to drive profitable growth in new markets and shape the future of wired and wireless communications, including network convergence, fiber and mobility everywhere, 5G, Internet of Things (IoT) and rapidly changing network and technology architectures.
The combination of the companies, which includes Ruckus Networks, also is structured to deliver near-term financial benefits to CommScope, including an expected 30-plus percent accretion to adjusted earnings per share in the first full year post-close and annual cost synergies of at least $150 million within three years. Pro forma 2018 revenues of the combined company were approximately $11.3 billion.
CommScope also is expected to generate nearly $1 billion of cash flow from operations in the first complete year post-close, and expects to use the free cash flow to aggressively pay down debt. Through the completion of the transaction, CommScope has expanded its product offerings and R&D capabilities, with the combined company having approximately 15,000 patents and patent applications globally and approximately $800 million in average annualized R&D spending.
"This is a major milestone in the evolution of these two great companies and a significant moment for our industry," said Eddie Edwards, president and chief executive officer, CommScope. "With the completion of this exciting transaction, we are creating a new CommScope that will help shape communications connectivity and networks of the future with greater technology, solutions and employee talent. We are committed to building on our well-established track record in prior transactions of meeting or exceeding our synergy targets and generating significant value for shareholders.
"We are focused on ensuring CommScope, with the fully integrated ARRIS and Ruckus businesses, is at its best financially, operationally and competitively. We are confident in our ability to solidify our leadership positions in the markets we serve and capitalize on opportunities in new markets. I look forward to continuing to work closely with all of our employees, including our new team members from ARRIS, as we strive to create a growth-oriented, innovative company focused on leading the upcoming network transformations."
"I believe this is a once-in-a-lifetime combination of two great companies that are poised to make a lasting impact on the communications industry and the customers we serve," said Bruce McClelland, formerly chief executive officer of ARRIS and now chief operating officer at CommScope. "Together, we combine great employee talent and experience, an impressive record of innovation and industry firsts, and a sharp focus on creating a world-class customer experience. The entire ARRIS team and I are eager to get started and help make CommScope one of the top names in technology."
In connection with the closing of the transaction, trading of ARRIS common stock was suspended and ARRIS requested that NASDAQ file with the Securities and Exchange Commission a Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934, as amended, on Form 25, thereby commencing the process of delisting and deregistering the common stock. ARRIS also intends to file a Form 15 to suspend its reporting obligations under Section 15(d) of the Exchange Act and to deregister its common stock under Section 12(g) of the Exchange Act.
CommScope will release financial results for its first quarter 2019 on May 9. Given that the acquisition closed after the quarter ended, CommScope will issue financial results on a standalone basis for the first quarter, but intends to issue guidance for the second quarter and full-year 2019 on a combined basis.
