Andrew rejects unsolicited acquisition proposal from CommScope, ends ADC relationship
August 10, 2006 - The board of directors of Andrew Corporation unanimously agreed yesterday evening to reject CommScope, Inc.'s unsolicited rival proposal to acquire the company for $9.50 per share in cash. Andrew also said that it and ADC Telecommunications had mutually terminated their merger pact of May 30, 2006 because "market considerations" raised significant questions about their ability to obtain necessary shareholder approvals.
Andrew said in a statement on Wednesday that CommScope's offer did "not adequately reflect the value of Andrew, its business prospects, and its industry-leading products, global customer base, and skilled global workforce."
In an acquisition attempt that has been conducted through letters and press releases, CommScope said, "We are disappointed that Andrew has decided to reject our proposal."
The Hickory, N.C. cable manufacturer would not state whether they were considering raising their offer in a hostile takeover.
Backing out of ADC deal to cost $10 million
To effect the mutual ADC termination, Andrew has agreed to pay ADC $10 million. In addition, Andrew has agreed that ADC would be paid another $65 million in the event Andrew effects a business combination transaction within 12 months.
CommScope will not pursue Andrew acquisition
In a company release issued today, CommScope said,"After careful consideration with our advisors, CommScope has decided not to pursue its proposal to acquire Andrew Corporation at the present time."
"CommScope's operational excellence and financial discipline have made us a global leader in the 'last mile' of telecommunications. We intend to continue building upon our leadership position and we are confident that CommScope is poised to continue creating value for its stockholders," CommScope said.
CommScope's decision was made all but certain by Andrew's disclosure Wednesday that it had agreed to pay $65 million to ADC in case it pursued any merger in the next twelve months.
"There was a collective sigh of relief," explained one senior product manager whose job was expected to be terminated due to the ADC merger. Hundreds of Andrew employees had already received a pre-warning letter that there might be a duplication in positions and there was a possibility that they might be let go.
England-based Precision Antenna employees also welcomed the news. Andrew had acquired the company less than four months ago.
Lightning logo still in vogue
Employees of the construction services group were generally pleased that the company was not going to be sold in the near future. Many of the workers were with American Tower Corporation when Andrew acquired the tower owner's construction division in late December of 2004.
"Although it has been a while, most of the integration issues have been finally resolved," said one construction manager, who wasn't pleased with the idea of assimilating into ADC's practices and culture.
For the past few weeks Andrew's managers had been meeting with their ADC counterparts to begin the transition until it came to a sudden halt with yesterday's announcement.
Some Andrew employees believe that a CommScope/Andrew merger would not be in the company's best interest. The all cash deal might have been financed by CommScope selling off non-core units to reduce the debt to purchase the company.
In addition, it would be expected that many Andrew workers would be let go as production facilities were relocated and duplicated management and administrative positions were terminated.
CommScope said earlier this week that a $50 million reduction in overhead was envisioned the first year.
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Negative Andrew market, but ADC given boost
At noon trading Andrew sank 8% with ADC Telecommunications showing a 9% rise reflecting investors' relief at the termination of the Andrew merger. Many of ADC's shareholders objected to the deal right from the start. CommScope shares were little changed at $28.21.
"While we still believe in the convergence strategy, the merger of Andrew and ADC was only one method to execute against that," said Ralph Faison, president and chief executive officer, Andrew Corporation. "We are confident in our ability to address the current and future needs of our customers and shareholders as an independent company.
"Andrew's industry-leading product portfolio and globally diversified customer base provide the company with a unique ability to meet the long-term global demand trends for wireless infrastructure. Andrew remains in a strong position to offer industry-leading support to operators, OEMs, and other communications providers around the world. As evidenced by our record sales and orders in our fiscal third quarter, we are growing share and improving operations through innovative products and the hard work of our global team. Our management team and employees are committed to delivering results and capitalizing on business opportunities that will drive future operational and financial improvements. We are confident in the outlook for our future," explained Faison.