JULY 13, 2010 -- Tyco Electronics (NYSE: TEL) and ADC (Nasdaq: ADCT) announced today a definitive agreement under which Tyco Electronics will acquire ADC for $12.75 per share in cash, or an enterprise value of approximately $1.25 billion. The transaction is expected to be accretive by approximately $0.14 per share in the first full year after closing excluding acquisition-related costs.
The merger will expand Tyco Electronics broadband offerings, particularly in the wireless arena via ADC's Distributed Antenna System (DAS) products. (For ADC’s perspective on the role of fiber in support of wireless applications, see the video interview with Dr. Michael Day, ADC CTO, on the Lightwave Channel.) Overall, Tyco Electronics expects combined broadband connectivity revenues of the merged companies to exceed $3 billion.
Simon M. Leopold, communications equipment analyst at Morgan Keegan & Co., called the deal "somewhat of a surprise and represents a 44% premium over yesterday's close." The premium should be enough to discourage competitive bids, Leopold concluded.
Leopold sees three salient opportunities for the Tyco/ADC pairing in 2011:
- potential business from the CenturyLink/Qwest merger as well as upgrades to the assets Frontier acquired from Verizon
- expected upgrades to AT&T mobile infrastructure
- Australia's National Broadband Network rollout (see "Alcatel-Lucent to supply GPON gear for Australia’s National Broadband Network" for more on this project).
Tom Lynch, CEO of Tyco Electronics, said, "This is a very exciting time for our company and ADC is a great fit as we continue to execute our strategy to create strong leadership positions in all of our connectivity businesses. Consumers and enterprises want access to high-speed video and data wherever they are, on whatever devices they are using -- from smart phones to HD and 3-D televisions to computers with advanced video-conferencing capabilities. 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."
Robert E. Switz, chairman, president, and CEO of ADC, said, "ADC has a strong heritage of providing innovative wired and wireless solutions that have enabled the expansion of advanced broadband networks worldwide. As part of Tyco Electronics, our organization's ability to serve the world's leading telecommunications services 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 transaction is structured as a tender offer to be followed as soon as possible by a merger. The transaction is subject to customary closing conditions, including the tender of a majority of ADC shares and regulatory approvals, and is expected to close in the fourth calendar quarter 2010.
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