TE Connectivity Ltd. (NYSE: TEL), a world leader in connectivity, announced today it has reached a definitive agreement to sell its Broadband Network Solutions (BNS) business unit to CommScope (NASDAQ: COMM) for $3.0 billion. The BNS business, which consists of TE's Telecommunications, Enterprise Networks and Wireless businesses, had revenue of $1.9 billion in fiscal year 2014. CommScope is a global provider of telecommunications infrastructure solutions for wireless, business enterprise and residential broadband networks.
"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," said Tom Lynch, TE Connectivity Chairman and Chief Executive Officer. "These markets represent a $165 billion opportunity for TE and have strong growth rates and attractive profit levels driven by the global trends of a safer, smarter, greener and more connected world.
"Earlier this fiscal year, we established TE as a leader in the high growth sensor market with two key acquisitions," said Lynch. "These acquisitions, in conjunction with the sale of BNS, will result in approximately 90 percent of TE's portfolio focused on providing leading connectivity and sensor solutions.
"We intend to use the majority of the proceeds from the sale for share repurchase," said Lynch. "We also expect to increase organic investments to strengthen our unmatched range of connectivity and sensor solutions and make strategic acquisitions to further expand our customer offering.
"CommScope is an industry leader, and we believe they are the right company to lead our BNS team and business going forward," said Lynch. "Our BNS team has built a successful business, and I want to thank them for their contributions, innovation leadership and commitment to TE over the years. We look forward to working closely with the CommScope team to close the transaction."
- The transaction sharpens TE's focus and enables the company to continue to expand its leadership position in the connector and sensor markets, where TE offers its customers the broadest range of products and solutions available. These markets represent a $165 billion opportunity for TE with attractive margins. As billions of devices, objects and people become part of the Internet of Things (IoT), TE technology is essential in sensing, connecting and transmitting the explosion of data that is being created. Upon completion of the transaction, 90 percent of TE's revenue will be focused on providing customers with leading connectivity and sensor solutions.
- TE's products are critical to harsh environment applications requiring highly engineered solutions that perform in extreme conditions. Upon completion of the transaction, approximately 80 percent of TE's revenues will be derived from harsh environment applications.
- The majority of the sale proceeds will be used for share repurchase. Sale proceeds will also be used to make strategic investments in the company's connectivity and sensor businesses.
TE has agreed to sell its BNS business for $3.0 billion. The BNS business, with sales in fiscal 2014 of $1.9 billion, is part of TE's Network Solutions segment. The sale price represents approximately 10X adjusted EBITDA. The sale does not include TE's Subsea Communications or Data Communications businesses, which also report into TE's Network Solutions segment.
The transaction is expected to close by December 31, 2015, and is subject to customary closing conditions and regulatory approvals.
TE's Board of Directors has authorized an expansion of its share repurchase program by an additional $3.0 billion.
Results related to the BNS business will be recast for prior periods and reported as discontinued operations on the company's financial statements beginning with its fiscal second quarter ending March 27, 2015.
Centerview Partners LLC, Goldman Sachs & Co. and Citi are serving as financial advisors to TE. Simpson Thacher & Bartlett, LLP, Allen & Overy, LLP and Sutherland Asbill & Brennan, LLP are serving as legal advisors to TE.