Carlyle in talks to buy CommScope
Tuesday, October 26, 2010
The Carlyle Group is in talks to buy telecommunications equipment-maker CommScope for $3âbillion, the latest in a string of billion-dollar deals by the District buyout firm.
CommScope on Monday confirmed the discussions, which it said could result in CommScope becoming a private company if Carlyle buys all of its shares for $31.50 apiece.
Carlyle's bid for CommScope comes as private equity firms look to take advantage of relatively cheap credit and low prices for acquisitions.
The buyout industry all but ground to a halt in the wake of the financial crisis, but analysts and industry sources said the sector has loosened up during the past six months.
"This is a large deal even by [private equity] bubble standards," said Dan Primack, a private equity analyst with Fortune.com.
A source familiar with the negotiations said Carlyle was still in talks with CommScope management. Any purchase must to go before the board and then be approved by shareholders. The source spoke on condition of anonymity because the discussions are ongoing.
CommScope builds equipment that is expected to be in greater demand as the telecommunications industry moves from copper wires to fiber optics. Shares of the North Carolina-based company jumped more than 30 percent after the talks were disclosed on Monday, closing at $30.16.
Primack said the CommScope deal could be a nice fit for both companies.
"This is Carlyle's sweet spot," he said. "It has a large communications investment practice."
Carlyle incurred substantial losses in recent years on a pair of telecommunications investments - Hawaiian Telcom and a Japanese mobile phone company - that soured when the companies sought bankruptcy protection.
Although Carlyle has had blowups with some telecom acquisitions, "that's not what CommScope is," Primack said.
"First off, CommScope throws off a decent amount of cash, which is what a [private-equity] firm wants," he said. "Two, there could be an argument that Carlyle thinks it's getting a bargain."
With tens of billions in clients' capital sitting on the sidelines, Carlyle has been on the hunt for good investments.
The firm in recent months has purchased a string of companies, including New York-based vitamin maker NBTY for $3.8 billion, Australian hospital operator Healthscope for $2.35 billion and Brazilian health-care company Qualicorp for $1.2 billion.
Private equity firms have initiated $133 billion of transactions this year, more than double the amount in the same period of 2009, according to data compiled by Bloomberg.