CommScope (COMM) Divests Home Networks Unit for Core Focus
CommScope Holding Company, Inc. COMM recently inked an agreement with Vantiva SA (formerly Technicolor SA) to divest its Home Networks business to focus more on its core operations. The transaction is likely to be completed by the end of 2023, subject to the fulfillment of mandatory closing conditions and regulatory approvals.
Headquartered in Paris, France, Vanita is a leading provider of innovative products and solutions for home entertainment. Per the deal, CommScope will gain a 25% stake in Vantiva. In addition, CommScope will have an opportunity to earn a maximum cumulative amount of $100 million in cash, contingent upon Vantiva achieving an EBITDA equal to or exceeding €400 million in a given fiscal year over the five years following the first full year after closing.
Post-acquisition, CommScope’s Home Networks will form an integral part of Vantiva’s Connected Home division. Notably, CommScope’s Home Networks and Vantiva’s Connected Home generated $1.5 billion and €2 billion in sales, respectively, in the 12 months ended June 2023. The buyout will significantly enhance Vantiva’s geographical footprint, expand its client base and will likely generate in excess of €100 million in pre-tax cash synergies driven by cost optimization initiatives and operational efficiencies.
In 2021, CommScope embarked on an initiative dubbed CommScope NEXT — a multi-faceted program to drive future growth that outpaces the market, optimize business processes and unlock shareholder value. As part of this strategy, CommScope intended to separate its Home Networks business to create an independent publicly traded entity.
The tax-free spin-off was aimed to enable both CommScope and Home Networks to drive innovation while enabling the latter to focus more on go-to-market strategy and develop its own technologies for home and consumer products on the back of a resilient manufacturing model. The restructuring would have also provided flexibility to the Home Networks business with a dedicated research & development team that will be responsible for stimulating growth in a “Connected Home” future. It appears that CommScope has finally been able to realize this vision.
CommScope is focused on sound technology, a highly efficient supply chain and a commitment to continuous improvement. This will potentially make the company a preferred partner for all telecommunications businesses as the entire industry moves toward 5G.
With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, CommScope is dedicated to developing solutions designed to support wireline and wireless network convergence, which will be essential for the success of 5G technology. The company’s portfolio of solutions has been specifically designed to help global service providers efficiently deploy fiber networks.
5G technology is likely to be disruptive in nature, with the potential to revolutionize a wide array of industries such as autonomous vehicles, smart cities, remote healthcare, augmented and virtual reality and industrial automation. CommScope’s Mosaic platform will enable mobile operators to integrate passive and active antennas for an economical 5G upgrade. With a flexible design and easy installation facility, it combines a multiband passive antenna with a partner active antenna system for a complete site solution.
The stock has lost 64% over the past year compared with the industry’s decline of 34.3%.
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CommScope presently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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