Exclusive: CommScope in talks to buy set-top box maker Arris - sources

(Reuters) - U.S. telecommunications equipment maker CommScope Holding Co Inc COMM.O is in talks to acquire set-top box maker Arris International PLC ARRS.O in a bid to expand its offerings, people familiar with the matter said on Wednesday.

The deal talks come as the popularity of video online streaming is putting pressure on telecommunications companies to upgrade their infrastructure and consolidate relationships with hardware equipment suppliers.

Both Arris’ and CommScope’s businesses have been challenged as a result of some of their products being seen by their customers as more commoditized and easily substituted. CommScope shares have lost close to half their value since last April, prompting the company to consider potential deals as an answer to its woes.

The negotiations between CommScope and Arris are ongoing and there is no certainty a deal will be reached, the sources said, asking not to be identified because the matter is confidential.

Arris and CommScope declined to comment.

Arris shares jumped as much as 13 percent on the report of the talks and closed up 6.7 percent at $24.06 on Wednesday, giving the company a market value of $4.3 billion. CommScope shares closed down 4.6 percent at $24.43, giving it a market value of $4.7 billion.

It is not clear how CommScope would fund the deal, though it would likely have to use its stock as currency to pay for a large portion of it.

Arris makes electronics such as modems and set-top boxes used by cable and satellite television companies. In 2016, it acquired British rival Pace PLC for $2.1 billion, and incorporated itself in Britain in a deal structured as a corporate tax inversion.

Last year, Arris also struck a deal to acquire Brocade Communications Systems Inc’s networking equipment business for $800 million, which added a suite of products to its portfolio that can serve areas with high demand for bandwidth, such as universities and airports.

CommScope, based in Hickory, North Carolina, was taken public by private equity firm Carlyle Group LP CG.O in 2013. It offers connectivity and infrastructure for the wireless industry and cable operators.

CommScope’s shares took a major hit in May after it lowered its full-year profit forecast, citing price reductions at certain large North American operators, as well as higher input costs.

Reporting by Liana B. Baker and Greg Roumeliotis in New York; Editing by Bill Rigby and Bill Berkrot