MINNEAPOLIS—Wireline connectivity equipment leader ADC Telecommunications Inc. announced it’s willing to pay $2 billion in stocks to acquire Andrew Corp., a move that would give ADC a major boost in the wireless gear arena.
Indeed, a combined Andrew and ADC will reap almost half of its revenues from sales of wireless equipment. The companies said their combined customer base breaks out into 44 percent wireless, 24 percent original equipment manufacturers, 23 percent to wireline, 6 percent enterprise, and 3 percent to other customers.
The companies said their combined sales for the past 12 months totaled $3.3 billion, and they expect their pre-tax earnings synergies to reach between $70 million and $80 million within three years after the deal closes. The combined company counts sales in more than 140 countries.
ADC’s President and Chief Executive Officer Robert Switz, who will also head the new company, said, “The wireline and wireless markets for next-generation broadband, video, data and voice services are rapidly expanding and have strong growth potential. Carriers in every part of the world are upgrading their networks to expand high-speed data and video offerings. These trends hold significant promise for the strategic combination of ADC and Andrew.”
The boards of directors of both companies have already approved the deal, which calls for ADC to own 56 percent of the combined company. Andrew shareholders will get 0.57 shares of ADC stock for each of their Andrew shares. Under the agreement, the new company will be called ADC Andrew, with Andrew operating as a fully owned subsidiary of ADC.
“As we join ADC’s leadership position in wireline connectivity solutions and Andrew’s leadership position in wireless infrastructure solutions, ADC and Andrew will have a substantially greater global presence, customer base, economies of scale, product breadth, innovation ability and financial strength,” said Ralph Faison, president and CEO of Andrew. “The synergies that we expect to create will enable us to better serve our converging customer base worldwide as their wireline and wireless networks deliver high-speed, any-content, anywhere communications services.”
Faison is expected to serve as a consultant to the combined company to “facilitate an efficient transition.”
For Andrew, the acquisition follows its April buyout of Precision Antennas Ltd. for $26 million. Precision Antenna was a subsidiary of U.K.-based aerospace and defense contractor Cobham plc, and makes antenna systems primarily for cellular network backhaul. Last year, Precision Antenna posted $46 million in sales. In addition, Andrew announced plans last November to acquire German broadband satellite network electronics manufacturer Skyware Radio Systems GmbH for around $9 million cash. Privately held Skyware generated $12 million in sales in Europe, the Middle East and Africa in 2004.
In addition, Andrew has signed deals with both ZTE Corp. and Qualcomm Inc. With ZTE the company plans to make TD-SCDMA equipment, and with Qualcomm the company signed a license agreement to sell W-CDMA picocell and microcell base-station systems.
News of the acquisition seemed to make Wall Street investors skittish, as ADC’s shares traded down $4.25 at $18.13 per share during midday trading. However, Andrew’s shares traded up 48 cents at $10.26 per share.
