Shares of CommScope Holding Company, Inc. (COMM) catapulted 18.3% during the regular trading session on Jan 27, following the market news of the company’s possible buyout of the Network Solutions division of TE Connectivity Ltd. (TEL). The materialization of the deal will be declared this week.
As per market reports, TE Connectivity is about to conclude the sale of its Network Solutions division for around $3 billion to CommScope. Importantly, the deal will not include the divestiture of the Network Solutions division’s subsea fiber optics business, which accounted for 2% of TE Connectivity’s annual sales in fiscal 2014.
The deal will be a win-win situation for both the companies. For CommScope, which has a market capitalization of $4.06 billion as of Jan 27, the acquisition will enhance its position in the industry. This Hickory, North Carolina-based company is a network infrastructure provider and specializes in end-to-end solutions related to technology and wireless and wired networks.
CommScope has been benefiting from its strong segments performance driven by growth of its business across Asia-Pacific, North American and European regions. It has reported an average earnings surprise of 7.21% in the trailing four quarters.
On the other hand, for TE Connectivity, the sale of a weak division will pave the way for strengthening the bottom line in the future. The Network Solutions division of the company has been reporting lower revenues since the last few quarters, with 4.8% year-over-year decline registered in fiscal 2014. Notably, TE Connectivity’s DataCom business has been affected by the sluggish demand, which is proving to be a drag on its upcoming high-speed solutions.
CommScope currently carries a Zacks Rank #3 (Hold). Better ranked stocks in the same sector include SBA Communications Corp. (SBAC) and Aruba Networks, Inc. (ARUN). Both stocks carry a Zacks Rank #2 (Buy).
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