CommScope Makes $1.7B Takeover Bid For Andrew Corp.
Posted August 7, 2006 9:58 a.m. EDT
HICKORY, N.C. — CommScope
has launched a hostile takeover bid for communications solutions provider Andrew Corporation with an offer worth $1.7 billion.
CommScope (NYSE: CTV), a broadband cable manufacturer, disclosed its offer on Monday morning.
CommScope moved in when the falling price of ADC stock cut the value of its offer to $1.1 billion from $2 billion.
Andrew operates a major satellite dish manufacturing operation in Smithfield and also has a business center in Garner. Andrew recently announced its intention to maintain the Smithfield facility rather than build a new plant in Goldsboro.
"We believe that Andrew's Board of Directors should readily find that our proposal is a 'Superior Proposal,' as defined by your existing merger agreement, and that entering into a combination with CommScope would be in the best interests of Andrew's shareholders," wrote Frank Drendel, CommScope's chairman and chief executive officer in a letter to Ralph Faison, Andrew's CEO.
By acquiring Andrew, CommScope said the merged company would become the "global leader in providing 'last mile' solutions for communications networks."
CommScope offered Andrew $9.50 per share in cash, or 36 percent more than the $6.97 per share offered in the ADC deal, CommScope said. The deal includes assumption of some $186 million in Andrew debt.
Andrew (Nasdaq: ANDW) stock closed at $7.89 on Friday. An Andrew spokesman told Reuters that the company would review the CommScope offer.
The news sent Andrew shares skyrocketing more than 24 percent, or $1.77, to $9.66 by 10 AM. It closed at $9.56, up $1.67 or 21 percent.
CommScope shares fell 7.5 percent, or $2.26, to $27.90 in early trading then closed at $28 for the day.
The combined company would produce cost savings of $30-50 million the first year and $70-90 in the second year, CommScope said.
In its most recent quarterly earnings report, CommScope beat Wall Street expectations handily with earnings of 65 cents a share and net revenues of $46.6 million on total revenues of $411.9 million. Analysts had expected a 9-cent per share profit.
Andrew reported a 4-cent per share profit, or $7 million, on record revenues of $551 million.
"We believe that our all-cash proposal is extremely compelling for Andrew shareholders and provides Andrew shareholders superior value over that contemplated by the existing merger agreement with ADC," Drendel said in a statement. "Under our proposal, Andrew shareholders will receive a substantial cash premium for their shares without the significant uncertainties inherent in ADC's proposed stock-for-stock merger transaction. We believe that Andrew's Board of Directors and shareholders will find our all-cash proposal superior to the ADC transaction.
"The combination of Andrew and CommScope is a logical step in the continued growth and development of CommScope," he added. "The combination will create a global leader in providing solutions for the 'last mile' of communications networks. The 'last mile' provides the final link between broadband and content-rich services and the end-user, including homes, business enterprises and wireless customers. Andrew is an excellent fit with our portfolio, and provides us with the opportunity to build upon CommScope's innovative carrier technologies and Andrew's strong global wireless channel and brand."
Andrew has operations in 36 countries.
CommScope said it had secured financial backing for the merger from Bank of America and Wachovia Bank.