TE Connectivity To Sell Part Of Network Business To CommScope For $3 Bln Cash

(RTTNews) - Diversified electronics maker TE Connectivity Ltd. (TEL) agreed Wednesday to sell its broadband network solutions or BNS business unit to telecommunications company CommScope Holding Co., Inc. (COMM) in an all-cash deal valued at about $3 billion. The sale will enable TE to focus on providing leading connectivity and sensor solutions, particularly harsh environment connectivity.

"Our decision to sell our BNS business reflects our strategy to continue focusing on and expanding our leadership position in the attractive connectivity and sensor markets, with particular emphasis on harsh environment applications," TE Chairman and CEO Tom Lynch said.

The BNS business, which consists of TE's telecommunications, enterprise networks and wireless businesses, generated revenues of $1.9 billion in fiscal 2014. However, TE said the sale does not include its subsea communications or data communications businesses.

The BNS business of Schaffhausen, Switzerland-based TE Connectivity makes equipment for telecommunications and data networks, including connectivity and sensor products.

TE said it will use a major chunk of the proceed from the sale for share repurchase as well as to boost organic investments to strengthen its unmatched range of connectivity and sensor solutions and make strategic acquisitions.

TE Connectivity was spun off from Tyco International in June 2007 and changed its name from Tyco Electronics Ltd. in March 2011.

CommScope, a global provider of telecommunications infrastructure solutions for wireless, business enterprise and residential broadband networks, separately noted it expects to fund the deal with cash on hand and up to $3 billion of incremental debt. It has received debt financing commitments from J.P. Morgan Securities LLC, BofA Merrill Lynch, Deutsche Bank and Wells Fargo.

CommScope added that the deal is expected to significantly add to its adjusted earnings per share and exceed $150 million in annual synergies beginning in the third year following closing of the deal.

The deal is expected to close by December 31, 2015.

TE's Board of Directors has also authorized an expansion of its share repurchase program by an additional $3 billion.

In a separate announcement, TE Connectivity posted a rise in its first-quarter net income to $472 million or $1.14 per share from $353 million or $0.84 per share last year. Quarterly adjusted earnings per share from continuing operations were $0.98, compared with $0.82 a year ago.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.90 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales increased 4 percent to $3.47 billion year-on-year and up 3 percent organically. Ten analysts were looking for sales of $3.51 billion for the quarter.

Looking ahead to the second quarter, TE said it expects adjusted earnings in a range of $0.98 to $1.02 per share, on projected net sales between $3.55 billion and $3.65 billion.

For fiscal 2015, the company projects adjusted earnings in a range of $4.05 to $4.35 per share, on projected net sales between $14.45 billion and $14.85 billion.

Street is currently looking for earnings of $1.02 per share on revenues of $3.68 billion for the second quarter, as well as annual earnings of $4.19 per share on revenues of $14.95 billion for the full-year 2015.

Meanwhile, CommScope provided fourth quarter adjusted earnings guidance in a range of $0.35 to $0.37 per share, based on about 192 million weighted average shares. The original guidance range was $0.30 to $0.35 per share.

On average, 12 analysts polled by Thomson Reuters expect earnings of $0.33 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue is also estimated in the range of $825 million to $830 million, which reflects the negative impact of foreign exchange rate changes. This compares to original guidance of $810 million to $850 million. Analysts expect revenues of $835.21 million.

Looking ahead to fiscal 2015, CommScope projects adjusted earnings in the range of $1.95 to $2.05 per share, based on about 194 million weighted average shares, and revenue that is flat to down 5 percent year over year.

Street is currently looking for fiscal 2015 earnings of $2.18 per share on revenues of $3.84 billion.

TEL closed Tuesday's regular trading at $64.63, down $0.05 on a volume of 3.36 million shares, while COMM closed at $25.57, up $2.82 on a volume of 10.54 million shares.