CommScope to spin off home networks business

TV and broadband technology provider CommScope is to spin-off its home networks business and launch a series of other initiatives to reduce operating costs. 

CommScope said that the planned separation of its home networks business and the cost-cutting exercise represented early steps in the ‘CommScope Next’ strategy to optimise its business portfolio, drive above-market growth and control costs.

CommScope plans to execute a tax-free spin-off of the home networks business to CommScope shareholders to form a new and independent publicly traded company. The separation is expected to be completed by the end of the first quarter of 2022.

“Since I joined CommScope last October, the Board and management team have been undertaking a comprehensive review of our portfolio of assets and how each contributes to our long-term growth strategy. As we proceeded with this review, it became clear that the Home Networks business’ distinct strategy, growth characteristics, investment requirements and returns on invested capital are not aligned with the rest of our portfolio. We believe that Home Networks will be better positioned to deliver superior home and consumer-oriented products as an independent company,” said Chuck Treadway, president and CEO of CommScope.

“In addition, we are moving quickly to streamline costs to create greater financial flexibility to invest in our growth. We expect the cost reduction actions we are taking in core CommScope to, at a minimum, offset Home Networks’ adjusted EBITDA and create savings we can reinvest in our business, which should result in post-spin leverage within core CommScope at no more than current levels.”

Treadway said that the CommScope Next strategy was well underway and that the company remained “excited about CommScope’s potential” and “confident in our ability to deliver innovative solutions for network convergence for customers around the world.”

The company said that the separate would create a clearer growth trajectory for CommScope, as well as greater opportunity for margin expansion, while focusing on providing market-leading solutions in wireless communications, broadband delivery and enterprise networking, that it would reduce complexity within the company and create a leading standalone home networks business that would have greater focus and an opportunity to access capital.

Following the completion of the spin-off transaction, CommScope will be composed of three business segments: broadband networks, venue and campus networks and outdoor wireless networks.

Treadway will continue to lead CommScope while Joe Chow, home networks senior vice-president, will become CEO of the stand-alone Home Networks company. The new company is expected to be listed on the NASDAQ stock exchange upon completion of the separation.

CommScope currently expects the transaction will be completed by the end of the first quarter of 2022, subject to market, regulatory and certain other conditions, including final approval of CommScope’s Board of Directors. J. Morgan is serving as financial advisor, and Alston & Bird and Baker McKenzie LLP are acting as legal advisors to CommScope.