Market Overview

CommScope to Acquire ARRIS: Approximately $7.4 Billion Transaction Accelerates CommScope Vision to Shape Communications Networks of the Future

Share:

Transaction More Than Doubles Expected Product Addressable Market
to Greater Than $60 Billion

Expected to Generate Approximately $1 Billion in Cash Flow from
Operations
1 and Be More Than 30
Percent Accretive to Adjusted EPS in First Full Year after Closing

Expect More than $150 Million in Annual Cost Synergies Within
Three Years

The Carlyle Group Reestablishes Ownership Position in CommScope
with $1 Billion Minority Investment

CommScope (NASDAQ:COMM), a global leader in infrastructure solutions
for communications networks, has agreed to acquire ARRIS International
plc (NASDAQ:ARRS), a global leader in entertainment and communications
solutions, in an all-cash transaction for $31.75 per share, or a total
purchase price of approximately $7.4 billion, including the repayment of
debt.

This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20181108005272/en/

The combined company is expected to drive profitable growth in new markets, shape the future of wire ...

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. (Graphic: Business Wire)

In addition, The Carlyle Group, a global alternative asset manager, has
reestablished an ownership position in CommScope through a $1 billion
minority equity investment as part of CommScope's financing of the
transaction.

The combination of CommScope and ARRIS, on a pro forma basis, would
create a company with approximately $11.3 billion in revenue and
adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) of approximately $1.8 billion, based on results for the
two companies for the 12 months ended September 30, 2018.

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.

ARRIS, an innovator in broadband, video and wireless technology,
combines hardware, software and services to enable advanced video
experiences and constant connectivity across a variety of environments –
for service providers, commercial verticals, small enterprises and the
people they serve. ARRIS has strong leadership positions in the three
segments in which it operates:

  • Customer Premises Equipment (CPE), featuring access devices such as
    broadband modems, gateways and routers and video set-tops and gateways;
  • Network & Cloud (N&C), combining broadband and video infrastructure
    with cloud-based software solutions; and
  • Enterprise Networks, incorporating the recently acquired Ruckus
    Wireless® and ICX Switch® businesses, and focusing on wireless and
    wired connectivity, including Citizens Broadband Radio Service
    solutions.

For the 12 months ended September 30, 2018, ARRIS generated revenues of
approximately $6.7 billion, consisting of $3.9 billion from CPE, $2.2
billion from N&C and $568 million from Enterprise Networks (reflecting
only a partial year of Ruckus since its acquisition in December 2017).

"After a comprehensive evaluation of our business and the evolving
industry we operate in, we are confident that combining with ARRIS is
the best path forward for CommScope to grow and provide the greatest
returns for shareholders," said Eddie Edwards, president and chief
executive officer, CommScope. "CommScope and ARRIS will bring together a
unique set of complementary assets and capabilities that enable
end-to-end wired and wireless communications infrastructure solutions
that neither company could otherwise achieve on its own. With ARRIS, we
will access new and growing markets, and have greater technology,
solutions and employee talent that will provide additional value and
benefit to our customers and partners.

"CommScope and ARRIS share a customer-first culture that emphasizes
innovation, made possible by incredibly talented and experienced teams
of people. As we have with numerous transactions in the past, we expect
to work together with Bruce McClelland and the ARRIS team to create a
best-in-class management team and achieve a seamless integration.
Together, CommScope and ARRIS will be well positioned to serve a more
diverse set of customers and generate substantial value for our
shareholders."

ARRIS Chief Executive Officer Bruce McClelland said, "CommScope is an
ideal partner for ARRIS. In addition to providing immediate and
substantial cash value to our shareholders, we are excited for what this
combination will deliver for our customers, partners and employees
around the world. Today's agreement is a testament to the strength of
ARRIS: our leading technology, talented employees and established
competitive position. With CommScope, we expect to further advance
ARRIS' strategy to drive innovation across our iconic brands and pioneer
the standards and pathways for tomorrow's personalized, connected
always-on consumer experience. ARRIS will become part of an even
stronger, more global industry leader, and I look forward to working
with the CommScope team to achieve great results for the combined
company."

Transaction is a critical step in fueling growth, shareholder value
and customer benefits:

  • Positioned to Capitalize on Positive Industry Trends: The
    combined company will be well positioned to benefit from key industry
    trends by combining best-in-class capabilities in network access
    technology and infrastructure and creating end-to-end and
    comprehensive solutions. We believe trends such as network
    convergence, fiber and mobility everywhere, the advent of 5G and fixed
    wireless access, Internet of Things and rapidly changing network and
    technology architectures will provide compelling long-term
    opportunities for the combined company and its unique end-to-end
    communications infrastructure capabilities.
  • Unlocks Significant, High-Growth Segments and Increases Product
    Addressable Market:
    The company expects to more than double its
    total product addressable market to more than $60 billion, with a
    unique set of complementary assets and capabilities that enable
    end-to-end communications infrastructure solutions such as:
    • Converged small cell solutions for licensed and unlicensed
      wireless spectrum;
    • Complementary wired and wireless communications infrastructure;
    • Integrated broadband access;
    • Private network solutions for industrial, enterprises and public
      venues; and
    • Comprehensive connected and smart home solutions.
  • Expanded Product Offerings and R&D Capabilities to Meet Diversified
    Customer Base:
    CommScope and ARRIS will share strong technical
    expertise with approximately 15,000 patents and approximately $800
    million in average annual research and development investments. With a
    stronger global footprint, the combined company is expected to serve
    customers across more than 150 countries.
  • Strong Financial Profile with Cost Savings Opportunities: For
    the 12 months ended September 30, 2018, on a pro forma basis, the
    combined company would have generated revenues of approximately $11.3
    billion with adjusted EBITDA of approximately $1.8 billion. As a
    result of the combined company's increased scale, CommScope expects to
    achieve annual run-rate cost savings of at least $150 million within
    three years post-close, with synergies of more than $60 million
    expected to be realized in the first full year after closing and more
    than $125 million expected to be realized after the second year
    post-close, driven from natural synergies primarily in direct
    procurement and SG&A.
  • Significantly Accretive to CommScope's Earnings: The
    transaction is expected to be more than 30 percent accretive to
    CommScope's adjusted earnings per share by the end of the first full
    year after closing, excluding purchase accounting charges, transition
    costs and other special items.
  • Maintains CommScope's Strong Balance Sheet, Credit Position and
    Financial Flexibility:
    With a unique set of complementary assets
    and capabilities that enable end-to-end communications infrastructure
    solutions, the combined company is expected to generate approximately
    $1 billion in cash flow from operations1 in the first full
    year after closing. Upon completion of the transaction, CommScope's
    net leverage (debt less cash) ratio based on pro forma adjusted EBITDA1
    for the 12 months ended September 30, 2018 is expected to be 5.1x,
    including full run-rate synergies of $150 million. Given the increased
    scale and cash flow generation, as well as both companies' track
    records of successful integration, CommScope expects to rapidly
    de-lever, targeting a net leverage ratio of approximately 4.0x in the
    second full year after closing. Long term, the company is targeting a
    net leverage ratio of 2.0x to 3.0x.

Terms and Financing

The per share cash consideration represents a premium of approximately
27 percent to the volume weighted average closing price of ARRIS' common
stock for the 30 trading days ended October 23, 2018, the day prior to
market rumors regarding a potential transaction.

The transaction is not subject to a financing condition. CommScope
expects to finance the transaction through a combination of cash on
hand, borrowings under existing credit facilities and approximately $6.3
billion of incremental debt for which it has received debt financing
commitments from J.P. Morgan Securities LLC, BofA Merrill Lynch and
Deutsche Bank Securities Inc.

In addition, The Carlyle Group, a former CommScope owner, is
reestablishing a minority ownership position in the company through a $1
billion equity investment, equal to approximately 16 percent of
CommScope's outstanding shares.

"We are delighted to resume our collaboration with CommScope's
accomplished management team," said Cam Dyer, Carlyle managing director
and global co-head of Technology, Media and Telecom. "We believe in the
company's long-term strategy, customer-centric culture and ability to
deliver results. This optimism has fueled our desire to be a part of
such a promising transaction with ARRIS."

Leadership and Headquarters

Following completion of the combination, Eddie Edwards will continue in
his role as president and chief executive officer of CommScope, with
Bruce McClelland and other members of the ARRIS leadership team joining
the combined company.

CommScope will remain headquartered in Hickory, NC, and the combined
company will maintain a significant presence in Suwanee, GA. Upon
completion of the transaction, CommScope will continue to be led by an
experienced board of directors and management team that leverage the
strengths of both companies.

Approvals

The transaction, which is expected to close in the first half of 2019,
is subject to the satisfaction of customary closing conditions;
expiration or termination of the applicable waiting period under the US
Hart-Scott-Rodino Antitrust Improvements Act; receipt of certain
regulatory approvals; and approval by ARRIS shareholders.

Advisors

Allen & Company LLC, Deutsche Bank, J.P. Morgan Securities LLC, and BofA
Merrill Lynch are serving as financial advisors to CommScope, and Alston
& Bird LLP, Latham & Watkins LLP, Cravath, Swaine & Moore LLP, Pinsent
Masons LLP and Skadden, Arps, Slate, Meagher & Flom LLP are serving as
legal counsel. Evercore is serving as financial advisor to ARRIS.
Troutman Sanders LLP, Herbert Smith Freehills LLP and Hogan Lovells LLP
are serving as legal counsel to ARRIS. Simpson, Thacher & Bartlett LLP
is serving as Carlyle's legal counsel.

Conference Call and Webcast

CommScope and ARRIS will host a conference call today, November 8, 2018,
at 8:30 a.m. ET to discuss the transaction. The conference call can be
accessed by dialing +1 844-397-6169 (U.S. and Canada only) or +1
478-219-0508 and giving the passcode 1458698.

A live webcast of the conference call will be available on the investor
relations section of each company's website at ir.commscope.com and
ir.arris.com. The webcast will be archived on the investor relations
section of each company's website.

Presentation and Infographic

Associated presentation materials and an infographic regarding the
transaction will be available on the investor relations section of each
company's website at www.commscope.com
and www.arris.com.

About CommScope

CommScope
(NASDAQ:COMM) helps design, build and manage wired and wireless
networks around the world. As a communications infrastructure leader, we
shape the always-on networks of tomorrow. For more than 40 years, our
global team of greater than 20,000 employees, innovators and
technologists have empowered customers in all regions of the world to
anticipate what's next and push the boundaries of what's possible.
Discover more at http://www.commscope.com/
Follow
us on Twitter
and LinkedIn
and like us on Facebook.

Sign up for our press
releases
and blog
posts
.

About ARRIS

ARRIS International plc (NASDAQ:ARRS) is powering a smart, connected
world. The company's leading hardware, software and services transform
the way that people and businesses stay informed, entertained and
connected. For more information, visit www.arris.com.

For the latest ARRIS news:

1 Financial metrics presented are adjusted to exclude
purchase accounting charges, transaction and integration costs and other
special items.

Caution Regarding Forward Looking Statements

This press release or any other oral or written statements made by
CommScope or ARRIS, or on either company's behalf, may include
forward-looking statements that reflect the current views of CommScope
and/or ARRIS (collectively, "us," "we," or "our") with respect to future
events and financial performance, including the proposed acquisition by
CommScope of ARRIS. These statements may discuss goals, intentions or
expectations as to future plans, trends, events, results of operations
or financial condition or otherwise, in each case, based on current
beliefs of our management, as well as assumptions made by, and
information currently available to, such management. These
forward-looking statements are generally identified by their use of such
terms and phrases as "intend," "goal," "estimate," "expect," "project,"
"projections," "plans," "potential," "anticipate," "should," "could,"
"designed to," "foreseeable future," "believe," "think," "scheduled,"
"outlook," "target," "guidance" and similar expressions, although not
all forward-looking statements contain such terms. This list of
indicative terms and phrases is not intended to be all-inclusive.

These statements are subject to various risks and uncertainties, many of
which are outside of our control, including, without limitation:
dependence on customers' capital spending on data and communication
systems; concentration of sales among a limited number of customers and
channel partners; changes in technology; industry competition and the
ability to retain customers through product innovation, introduction and
marketing; risks associated with sales through channel partners; changes
to the regulatory environment in which our customers operate; product
quality or performance issues and associated warranty claims; the
ability to maintain effective management information systems and to
implement major systems initiatives successfully; cyber-security
incidents, including data security breaches, ransomware or computer
viruses; the risk our global manufacturing operations suffer production
or shipping delays, causing difficulty in meeting customer demands; the
risk that internal production capacity or that of contract manufacturers
may be insufficient to meet customer demand or quality standards;
changes in cost and availability of key raw materials, components and
commodities and the potential effect on customer pricing; risks
associated with dependence on a limited number of key suppliers for
certain raw materials and components; the risk that contract
manufacturers we rely on encounter production, quality, financial or
other difficulties; our ability to integrate and fully realize
anticipated benefits from prior or future acquisitions or equity
investments; potential difficulties in realigning global manufacturing
capacity and capabilities among global manufacturing facilities or those
of our contract manufacturers that may affect our ability to meet
customer demands for products; possible future restructuring actions;
substantial indebtedness and maintaining compliance with debt covenants;
our ability to incur additional indebtedness; our ability to generate
cash to service our indebtedness; possible future impairment charges for
fixed or intangible assets, including goodwill; income tax rate
variability and ability to recover amounts recorded as deferred tax
assets; our ability to attract and retain qualified key employees; labor
unrest; obligations under defined benefit employee benefit plans may
require plan contributions in excess of current estimates; significant
international operations exposing us to economic, political and other
risks, including the impact of variability in foreign exchange rates;
our ability to comply with governmental anti-corruption laws and
regulations and export and import controls worldwide; our ability to
compete in international markets due to export and import controls to
which we may be subject; the impact of the U.K. invoking Article 50 of
the Lisbon Treaty to leave the European Union; changes in the laws and
policies in the United States affecting trade, including recently
enacted tariffs on imports from China, as well as the risks and
uncertainties related to tariffs or a potential global trade war that
may impact our products; costs of protecting or defending intellectual
property; costs and challenges of compliance with domestic and foreign
environmental laws; the impact of litigation and similar regulatory
proceedings that we are involved in or may become involved in, including
the costs of such litigation; risks associated with stockholder
activism, which could cause us to incur significant expense, hinder
execution of our business strategy and impact the trading value of our
securities; and other factors beyond our control. These risks and
uncertainties may be magnified by CommScope's acquisition of ARRIS, and
such statements are also subject to the risks and uncertainties related
to ARRIS' business.

Such forward-looking statements are subject to additional risks and
uncertainties related to CommScope's proposed acquisition of ARRIS, many
of which are outside of our control, including, without limitation:
failure to obtain applicable regulatory approvals in a timely manner, on
acceptable terms or at all, or to satisfy the other closing conditions
to the proposed acquisition; the risk that CommScope will not
successfully integrate ARRIS or that CommScope will not realize
estimated cost savings, synergies, growth or other anticipated benefits,
or that such benefits may take longer to realize than expected; risks
relating to unanticipated costs of integration; the potential impact of
announcement or consummation of the proposed acquisition on
relationships with third parties, including customers, employees and
competitors; failure to manage potential conflicts of interest between
or among customers; integration of information technology systems;
conditions in the credit markets that could impact the costs associated
with financing the acquisition; the possibility that competing offers
will be made; and other factors beyond our control.

These and other factors are discussed in greater detail in the reports
filed by CommScope and ARRIS with the U.S. Securities and Exchange
Commission, including CommScope's Annual Report on Form 10-K for the
year ended December 31, 2017 and Quarterly Report on Form 10-Q for the
period ended September 30, 2018 and ARRIS' Quarterly Report on Form 10-Q
for the period ended June 30, 2018. Although the information contained
in this press release represents our best judgment as of the date hereof
based on information currently available and reasonable assumptions,
neither CommScope nor ARRIS can give any assurance that the expectations
will be attained or that any deviation will not be material. Given these
uncertainties, we caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date made.
Neither CommScope nor ARRIS are undertaking any duty or obligation to
update this information to reflect developments or information obtained
after the date of this report, except as otherwise may be required by
law.

Non-GAAP Financial Measures

CommScope and ARRIS' management believe that presenting certain non-GAAP
financial measures provides meaningful information to investors in
understanding operating results and may enhance investors' ability to
analyze financial and business trends. Non-GAAP measures are not a
substitute for GAAP measures and should be considered together with the
GAAP financial measures. As calculated, CommScope and ARRIS' non-GAAP
measures may not be comparable to other similarly titled measures of
other companies. In addition, CommScope and ARRIS' management believe
that these non-GAAP financial measures allow investors to compare period
to period more easily by excluding items that could have a
disproportionately negative or positive impact on results in any
particular period. GAAP to non-GAAP reconciliations for historical
periods are included in the reports CommScope and ARRIS file with the
U.S. Securities and Exchange Commission.

Important Additional Information Regarding the Transaction and Where
to Find It

In connection with the proposed transaction, ARRIS will prepare a proxy
statement to be filed with the Securities and Exchange Commission (the
"SEC"). When completed, a definitive proxy statement and a form of proxy
will be mailed to the stockholders of ARRIS. INVESTORS AND
STOCKHOLDERS OF ARRIS ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE TRANSACTION, INCLUDING ARRIS' PROXY
STATEMENT WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR
INVESTMENT DECISIONS WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION, THE
PARTIES TO THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE
TRANSACTION.
Those documents, if and when filed, as well as ARRIS'
other public filings with the SEC may be obtained without charge at the
SEC's web site, http://www.sec.gov,
or at ARRIS' website at http://ir.arris.com.
ARRIS' stockholders and other interested parties will also be able to
obtain, without charge, a copy of the proxy statement and other relevant
documents (when available) by directing a request by mail to ARRIS
Investor Relations, 3871 Lakefield Drive, Suwanee, GA 30024 or at http://ir.arris.com.

Participants in the Solicitation

ARRIS and its directors and certain of its executive officers, and
CommScope and its directors and certain of its executive officers, may
be deemed to be participants in the solicitation of proxies from ARRIS'
stockholders in connection with the proposed transaction. Information
about the directors and executive officers of ARRIS is set forth in its
Annual Report on Form 10-K for the year ended December 31, 2017, which
was filed with the SEC on March 23, 2018, and its proxy statement for
its 2018 annual meeting of stockholders, which was filed with the SEC on
March 23, 2018. Information about the directors and executive officers
of CommScope is set forth in the proxy statement for CommScope's 2018
annual meeting of stockholders, which was filed with the SEC on March
20, 2018. Additional information regarding potential participants in the
solicitation of proxies from ARRIS' stockholders and a description of
their direct and indirect interests, by security holdings or otherwise,
will be included in ARRIS' proxy statement when it is filed.

View Comments and Join the Discussion!