Tyco Electronics is acquiring ADC for approximately $1.25 billion.
In a statement announcing the acquisition agreement, Tyco CEO Tom Lynch said, "The combination of ADC and Tyco Electronics creates an industry leader, with the scope and geographic scale to help customers deliver needed capacity, from the core of the network all the way to the end user."
Recent Research: Interconnect merger-and-acquisition activity should rise in 2010
ADC president and CEO Robert Switz said, "As part of Tyco Electronics, our organization's ability to serve the world's leading telecommunications service providers and enterprises will be strengthened significantly. I have great respect for Tyco Electronics and know that they share our commitment to meeting customers' changing next-generation network needs."
The statement issued by ADC made specific mention of ADC's distributed antenna system (DAS) products.
Related Story: Major automakers deploy ADC in-building cellular systems
The release further stated that the transaction is structured as a tender offer to be followed as soon as possible by a merger. It is subject to customary closing conditions and regulatory approvals.
Closing is expected in the fourth quarter of this year.
According to reporting by Dow Jones Newswires' Roger Cheng in today's Wall Street Journal, Tyco "plans to wed ADC's wired and wireless equipment business with its own portfolio of wireless connectivity products, allowing the two to better win business from telecommunications companies and large business customers. The deal underscores the growing demand for select equipment to handle higher volumes of wireless and wired data traffic, but also the need for consolidation in the industry."
Ed. Note -- Full link to Wall Street Journal coverage here.
"This transaction positions us very well to take advantage of continuing evolution of the broadband network," Tyco Chief Executive Tom Lynch told analysts during a conference call."
"ADC, which counts U.S. telecommunications giants AT&T Inc. (T) and Verizon Communications Inc. (VZ) as its largest customers, has a strong position in the Americas, as well as growing markets such as China. Tyco does more of its business in Europe, as well as India. While telecommunications spending in total has slowed dramatically, there remain pockets of growth, including the move to fiber-optic lines and the need to improve the wireless infrastructure."
Related Story: CommScope unveils in-building cellular system
"Tyco will benefit from ADC's speciality in laying down fiber-optic lines to replace slower copper ones, such as Verizon's move to overhaul its network. CL King & Associates analyst Lawrence Harris said there remains opportunity to upgrade networks in several markets around the world, including Australia, China and the U.K.In addition, ADC's business of improving in-building wireless signals, as well as outdoor distributed network could benefit from the broader need by the carriers to improve their coverage."
"Tyco expects the telecom business to reach its target operating margin of 15% in the third year after the acquisition. Lynch said the company plans to maintain a strong balance sheet to pursue additional opportunities. ADC, meanwhile, had long been on the hunt for other equipment businesses, but ended up the acquisition target."
"The industry is ripe for consolidation," Jim Mathews, chief financial officer of ADC, told Dow Jones Newswires. He added there was never the right opportunity at the right price for a deal.
Lynch declined to comment on who from ADC would stay on after the deal, but he noted that one of the attractive aspects of the deal was ADC's talent.
Tyco, meanwhile, projected earnings for the quarter ended June 25 of 70 cents as sales jumped 23% to $3.1 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of 63 cents on $3.04 billion in revenue. The company plans to report its full fiscal third quarter results July 22."
More Interconnection Business News
