CommScope has agreed to acquire set-top box maker ARRIS for $7.4 billion in cash as per a latest announcement. Private-equity firm Carlyle Group, which took CommScope public in 2013, has re-established an ownership position in CommScope through a $1 billion minority equity investment as part of CommScope’s financing of the transaction.
ARRIS has a presence in the cable wireline broadband space and a significant chunk of its revenue comes from its pay TV set-top business. The company bulked up by buying Motorola Mobility’s home unit from Google in 2012 and Pace, a U.K.-based set-top box manufacturer, in 2015. In 2017, ARRIS acquired Ruckus Wireless from Broadcom.
CommScope has evolved from one of the world’s largest providers of coaxial cable for businesses and telephone companies to a broad manufacturer of telecom gear.
Post acquisition, CommScope and ARRIS are hoping to capture market share in the burgeoning 5G, fiber and Internet of things markets, as well as other high-growth areas like private networks and connected homes. The companies expect to have combined revenue of approximately $11.3 billion and adjusted EBITDA of approximately $1.8 billion.
“For several years, we have watched quite closely as Ruckus has grown to become a strong leader in the market,” said CommScope CEO Eddie Edwards, on a conference call with analysts. “The Ruckus team will be a critical and highly complementary addition to CommScope.”
“Our highly complementary offering, footprints, and customer relationships provide significant diversification and the transaction strengthens our positioning in the segments with the highest growth potential. The new spectrum being planned for 5G around the world being near, and now we expect a greater amount of wireless connectivity infrastructure to be needed indoors utilizing both licensed and unlicensed technologies, which the combined company will now have” said Eddie Edwards.
CommScope makes telecommunications equipment, including cables, splitters and antennas, and will gain a cable TV set-top box maker in Arris, which nearly doubled in size in 2016 after buying rival Pace for $2.1 billion. Set-top boxes make up about 35 percent of Arris’s total revenue. The company also makes other telecom networking equipment for wireless and cable operators.
The combined company is expected to drive profitable growth in new markets, shape the future of wired and wireless communications, and position the new company to benefit from key industry trends, including network convergence, fiber and mobility everywhere, 5G, Internet of Things and rapidly changing network and technology architectures.
The deal is expected to close in the first half of 2019.