CommScope Holding Company, Inc. is contemplating the sale of its broadband connectivity and cable division, known as CCS. The company has engaged an advisor to assess interest from potential buyers for this unit, which contributes 60-70% of CommScope’s revenue.
Overview of CCS
CCS provides high-speed broadband solutions for internet service providers catering to homes, businesses, and other customers. Additionally, it offers connectivity products for data centers and network infrastructure. Insiders indicate that the growing demand for artificial intelligence (AI) is propelling growth in this sector.
Financial Context
The potential sale of CCS represents a significant strategic move for CommScope as it navigates its financial challenges following a series of debt-related issues in recent years. Key points include:
- In 2019, CommScope acquired Ericsson’s wireless networking business for $7.6 billion but faced rising debt levels afterward.
- By mid-2020, the company’s net debt-to-adjusted EBITDA ratio surged from three times pre-pandemic levels to nearly six times, before slightly decreasing during COVID lockdowns when spending on new equipment sharply declined.
Recent Actions to Address Debt
To mitigate its debt issues, CommScope agreed earlier this year to sell its mobile networks business to Amphenol Corp., a US-based electronics manufacturer specializing in connectors and interconnect systems across various industries, including aerospace and defense.
- The deal was valued at $2.1 billion in cash and will be partially allocated to reducing the debt incurred from the acquisition of Ericsson’s wireless networking business.
Future Plans
A spokesperson for Apollo Global Management Inc., Monarch Alternative Capital LP, and other lenders expressed confidence in their plans despite market volatility. They were recently questioned about their strategies following reports of a potential exit plan due to lackluster performance at CommScope since Apollo took control two years ago.
In summary, CommScope’s consideration of selling its CCS division highlights its ongoing efforts to stabilize its financial situation while responding to market demands and challenges.
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