* 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 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
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
"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
"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.
Private equity firms have clinched a handful of deals in
the telecom sector over the last few years. During the
leveraged buyout bubble in 2007, Silver Lake and TPG Capital
acquired communications equipment company Avaya Inc for $8.3
billion. In 2009, Avaya bought Nortel's enterprise business for
Some of Carlyle's previous telecommunications deals have
not fared so well. The firm acquired debt-laden Hawaiian
Telecom in 2005 for $1.6 billion from Verizon Communications.
Three years later the Hawaiian provider of local and
long-distance telephone service filed for bankruptcy
(For a Breakingviews column on Carlyle and its
telecommunications investments, click on [ID:nN25108118].)
"[Carlyle] sees a significant valuation disconnect with
CommScope," said an analyst who requested anonymity, pointing
to CommScope's share price after the company reported
second-quarter results on July 28. [ID:nSGE66R0ME]
CommScope forecast weak third-quarter sales and said it
would be difficult to increase operating income this year. The
share price has dropped 15 percent since then.
CommScope said no agreement has been reached yet and there
was no assurance any transaction would result from the
Allen & Co LLC is serving as financial adviser to
Standard & Poor's placed its BB- ratings of North
Carolina-based CommScope on CreditWatch with negative
Deal volume among private equity firms has been increasing,
with interest among private equity firms in taking hard drive
maker Seagate Technology Plc (STX.O) private, sources familiar
with the situation have said. [ID:nN15208510].
Private equity firms are also circling hair-salon operator
Regis Corp (RGS.N), sources familiar with the situation
previously told Reuters. [ID:nN22195529].
(Reporting by Megan Davies and Nadia Damouni in New York and
Sakthi Prasad and Jennifer Robin Raj in Bangalore; editing by
Gopakumar Warrier, Derek Caney, John Wallace, Steve Orlofsky
and Andre Grenon)