Carlyle in talks to buy CommScope for $3 billion

Mon Oct 25, 2010 5:49pm EDT

* Carlyle offering $31.50 per share in cash

* Offer values CommScope at $2.98 bln

* No agreement yet

* CommScope shares jump 30 pct (Recasts; adds S&P rating, more analysts remarks)

By Megan Davies and Nadia Damouni

NEW YORK, Oct 25 (Reuters) - Private equity firm Carlyle Group [CYL.UL] is in talks to buy communications cable maker CommScope Inc (CTV.N) for about $3 billion, as it looks to bolster its telecom holdings by acquiring one of the top infrastructure suppliers to wireless carriers.

It is the latest sign of a resurgence of acquisitions by private equity firms, which are under pressure to invest billions of dollars of capital raised in the past few years.

Private equity takeovers -- known as leveraged buyouts -- plummeted after the credit crisis limited access to debt financing. But the financing markets have since improved enough for large deals to be struck again. In July, Carlyle announced a $3.8 billion deal to buy U.S. nutritional supplements maker NBTY Inc.

Under the terms of a potential deal, Carlyle would buy CommScope for $31.50 per share in cash, a premium of 36 percent to the shares' Friday's closing price, CommScope said.

CommScope has struggled in recent years due to competition from Chinese and Indian competitors, said Barry McCarver, an analyst at Stephens, but added the company is still considered a high quality asset.

CommScope shares closed 30 percent higher at $30.16 on Monday.

"We consider a deal price of $31.50 fair," UBS analysts said in a research note. But they added that their "own internal analysis had produced scenarios with a potential take-out value 5-10 percent higher."

The UBS analysts said they did not foresee any rival telecommunications companies or other logical strategic buyers emerging to counter Carlyle's bid.

Corning Inc (GLW.N), and possibly 3M Co (MMM.N) and Huawei Technologies Co Ltd [HWT.UL], would be the most likely strategic buyers that would consider a deal, the analysts said. But "we believe either price, size of deal, cultural and regulatory hurdles, would make it difficult to consummate any deal," they wrote.

The deal values CommScope at $2.98 billion, based on 94.72 million shares outstanding as of July 21, according to Thomson Reuters data.

"We believe such a deal could make sense given the strong experienced management team, solid end-market demand, and the company's ability to generate profits and free cash flow," Soleil Securities analyst Michael Genovese said. He noted that CommScope shares had been down about 13 percent this year.