EXHIBIT 99.1
[COMPANY LOGO] COMMSCOPE
P.O. Box 339, Hickory, NC 28603
INVESTOR CONTACT: MEDIA CONTACT:
Phil Armstrong Paul Caminiti/Kim Levy Betsy Lambert
CommScope Citigate Sard Verbinnen CommScope
828-323-4848 212-687-8080 828-323-4873
COMMSCOPE TO ACQUIRE AVAYA'S CONNECTIVITY SOLUTIONS BUSINESS
FOR $263 MILLION IN CASH AND SECURITIES
STRATEGIC ACQUISITION WOULD DOUBLE COMMSCOPE'S SIZE;
ADDS SYSTIMAX(R) STRUCTURED CONNECTIVITY SOLUTIONS BUSINESS
AND GIVES COMMSCOPE A LEADING POSITION IN THE
GLOBAL ENTERPRISE LAN BUSINESS
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HICKORY, NC, OCTOBER 27, 2003 - CommScope, Inc. (NYSE: CTV) announced today
that it has signed a definitive agreement with Avaya Inc. (NYSE: AV) to
acquire its Connectivity Solutions (ACS) business for cash and securities
valued at approximately $263 million. ACS is a global leader in the design,
development, manufacture and marketing of enterprise structured cabling
solutions for Local Area Network (LAN) applications. ACS is also a U.S.
leader in structured cabling and equipment for telephone central offices,
as well as a leader in secure environmental enclosures for
telecommunications applications. Enterprise structured cabling systems
connect personal computers, workstations, phones, LANs, and other
communication devices through buildings or across campuses.
With the highly complementary addition of the connectivity solutions
business, CommScope will be a global leader in the enterprise LAN business
in addition to its current position as the world's largest manufacturer of
broadband coaxial cable for Hybrid Fiber Coaxial (HFC) applications and a
leading provider of fiber optic cable for HFC. CommScope also has a growing
position in the wireless business. ACS had revenues for the twelve months
ended September 30, 2003 totaling $542 million, according to Avaya's public
information, while CommScope had revenues of $555 million for the same
period (see attached Supplemental Information).
The strategic acquisition of ACS enhances CommScope's global brand and
market presence in the enterprise LAN business. ACS is recognized as the
preeminent brand in structured cabling for LAN solutions, as well as for
its technological innovation, particularly with its SYSTIMAX(R) end-to-end
connectivity solutions for customers' on-premises voice and data networking
needs. Additionally, CommScope's fiber optic cable technology, enhanced
through its relationship with OFS, complements ACS' enterprise LAN product
offering.
Under the terms of the agreement, Avaya will receive $210 million in cash,
an $18 million convertible subordinated note from CommScope and $34.9
million in CommScope common stock, subject to adjustment. The cash
component of the transaction is expected to be funded primarily from
CommScope's existing cash balances and through a new $150 million senior
secured credit facility underwritten by Wachovia Securities. CommScope had
$171 million in cash and cash equivalents on its balance sheet as of
September 30, 2003. CommScope will purchase the net assets of ACS,
including certain defined current liabilities and assets, which totaled
approximately $300 million as of June 30, 2003, based upon Avaya's
historical financial statements. CommScope will also assume up to
approximately $75 million of other specified liabilities of ACS, primarily
related to employee benefits. The transaction, which is subject to
customary closing conditions and approval by necessary regulatory
authorities, is expected to close within 90 days except with regard to
certain international operations.
CommScope expects to incur incremental transition costs of approximately
$25 million during the first year of operating the ACS business, primarily
related to information technology and other transition services. Excluding
acquisition-related and transition costs, CommScope expects the acquisition
of ACS to be accretive to earnings per share for calendar year 2004.
Avaya's publicly-reported segment operating income for ACS includes
corporate overhead allocations from Avaya primarily related to general and
administrative expenses. CommScope believes that it can provide these
services to ACS at a lower cost than Avaya's historical corporate
allocation.
"ACS is an excellent strategic fit and a logical step in the continued
growth and development of CommScope as we execute our last mile strategy,"
said Frank M. Drendel, Chairman and Chief Executive Officer of CommScope.
"This transaction represents a unique opportunity to acquire a preeminent
industry player at an attractive valuation and establish CommScope as a
global leader in the enterprise LAN area. As the recognized leader in
data connectivity innovations, ACS has a premier range of products in
SYSTIMAX, a successful R&D program, talented personnel and extensive global
customer relationships.
Drendel continued, "As we move forward, we believe we can further enhance
the long-term growth and profitability of the SYSTIMAX product line through
renewed focus and commitment to this business. We look forward to working
with the talented ACS team."
Wachovia Securities is serving as CommScope's financial advisor on the
transaction and Fried, Frank, Harris, Shriver & Jacobson and Robinson,
Bradshaw & Hinson are acting as the Company's principal legal advisors.
ABOUT ACS
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ACS is the global leader in the design, development, manufacture and
marketing of physical layer end-to-end structured cabling solutions for LAN
applications and a U.S. leader in physical layer structured cabling
solutions supporting central offices of telecommunications service
providers. With 2,000 employees worldwide, ACS has a network of
manufacturing and distribution facilities in North America, Europe and
Asia/Pacific Rim.
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ABOUT COMMSCOPE
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CommScope is the world's largest manufacturer of broadband coaxial cable
for Hybrid Fiber Coaxial (HFC) applications and a leading supplier of
high-performance fiber optic and twisted pair cables for LAN, wireless and
other communications applications. Through its relationship with OFS,
CommScope has an ownership interest in one of the world's largest producers
of optical fiber and cable and has access to a broad array of connectivity
components as well as technologically advanced optical fibers, including
the zero water peak optical fibers used in the production of the LightScope
ZWP(TM) and LaserCore(R) families of cable products. Visit CommScope at its
website: www.commscope.com.
CONFERENCE CALL INFORMATION
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CommScope will hold a conference call/webcast today at 10:00 a.m. EST to
discuss the transaction and third quarter 2003 results. A replay will be
available for two weeks after the call/webcast (please see information
below).
DATE: October 27, 2003
TIME: 10:00 a.m. EST
DOMESTIC DIAL-IN NUMBER: 800.299.7635
INTERNATIONAL DIAL-IN-NUMBER: 617.786.2901
WEBCAST: www.commscope.com
REPLAY AVAILABLE UNTIL 12:00 a.m. EST on November 10, 2003
DOMESTIC REPLAY: 888-286-8010, Pin 53366531
INTERNATIONAL REPLAY: 617-801-6888, Pin 53366531
WEBCAST REPLAY: www.commscope.com
FORWARD-LOOKING STATEMENTS
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This press release contains forward-looking statements regarding the
business position, plans, outlook, revenues, earnings, accretion, synergies
and other financial items, integration and restructuring plans, and
anticipated timing of closing related to CommScope's planned acquisition of
substantially all of the assets and certain liabilities of ACS that are
based on information currently available to management, management's
beliefs and a number of assumptions concerning future events.
Forward-looking statements are not a guarantee of performance and are
subject to a number of uncertainties and other factors that could cause the
actual results to differ materially from those currently expected. The
potential risks and uncertainties that could cause actual results to differ
materially include, but are not limited to, the ability of the company to
complete the acquisition; the challenges of integration and restructuring
associated with the acquisition; the challenges of achieving anticipated
synergies; the ability to retain qualified employees and existing business
alliances; maintaining satisfactory relationships with represented
employees; customer demand for ACS products, applications and service; any
statements of belief and any statements of assumptions underlying any of
the foregoing; expected demand from Comcast Corporation and other major
domestic MSOs; telecommunications industry capital spending; industry
consolidation; ability of our customers to secure adequate financing to
fund their infrastructure projects or to pay us; product demand and
industry excess capacity; changes or fluctuations in global business
conditions; financial performance and limited control of OFS BrightWave;
competitive pricing and acceptance of our products; changes in cost and
availability of key raw materials, especially those that are available only
from limited sources; ability to recover higher material and transportation
costs from our customers through price increases; possible future
impairment charges for goodwill and other long-lived assets; industry
competition and the ability to retain customers; possible disruption due to
customer or supplier bankruptcy, reorganization or restructuring; our
ability to obtain financing and capital on commercially reasonable terms;
covenant restrictions and our ability to comply with covenants in our debt
agreements; successful operation of bimetals manufacturing and other
vertical integration activities; successful expansion and related operation
of our facilities; achievement of sales, growth and earnings goals; ability
to achieve reductions in costs; ability to retain and attract key
personnel; developments in technology; intellectual
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property protection; product performance issues and associated warranties;
regulatory changes affecting us or the industries we serve; acquisition
activities and the ability to integrate acquisitions; environmental issues;
terrorist activity or armed conflict; political instability; major health
concerns and other factors. For a more complete description of factors that
could cause such a difference, please see CommScope's filings with the
Securities and Exchange Commission. In providing forward-looking
statements, the Company does not intend, and is not undertaking any duty or
obligation, to update these statements as a result of new information,
future events or otherwise.
# # #
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SUPPLEMENTAL INFORMATION
(UNAUDITED - IN MILLIONS)
--------------------------
Avaya Connectivity
REVENUES CommScope (1) Solutions (2)
- -------- ------------- -------------------
Quarter ended 12/31/02 $135.9 $121.0
Quarter ended 3/31/03 $129.4 $131.0
Quarter ended 6/30/03 $141.4 $143.0
Quarter ended 9/30/03 $148.7 $147.0
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Revenues - twelve months ended 9/30/03 $555.4 $542.0
Avaya Connectivity
OPERATING INCOME (LOSS) CommScope (1) Solutions (2)
- ----------------------- ------------- -------------------
Quarter ended 12/31/02 $3.1 ($8.0)
Quarter ended 3/31/03 $2.5 $3.0
Quarter ended 6/30/03 ($26.2) $3.0
Quarter ended 9/30/03 $8.3 $5.0
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Operating Income (loss) - twelve months ended 9/30/03 ($12.3) $3.0
Depreciation/amortization - twelve months ended 9/30/03 $34.5 $28.0 (3)
NOTE: These historical results are not necessarily indicative of results to be expected in future periods
and not intended to reflect the ACS business on a pro forma consolidated basis with CommScope.
COMMSCOPE ESTIMATED TRANSITION COST
- -----------------------------------
CommScope estimates first year transition costs to be approximately $25
million primarily related to information technology and other transition
services.
COMMSCOPE ESTIMATED OVERHEAD COST
- ---------------------------------
Avaya Inc.'s publicly-reported segment operating income for ACS includes
corporate overhead allocations from Avaya primarily related to general and
administrative expenses. CommScope believes that it can provide these
services to ACS at a lower cost than the historical Avaya corporate
allocation.
<FN>
SOURCES:
1) CommScope data from quarterly and annual reports filed with the SEC and
public press releases for the periods presented. Operating income
(loss) includes impairment charges for fixed assets of $31.7 million in
the quarter ended 6/30/03.
2) Avaya Connectivity Solutions data from segment data included in Avaya
annual and quarterly reports filed with the SEC and quarterly segment
detail included in public press releases for periods presented. For a
complete presentation of ACS segment results, refer to Avaya's SEC
filings and quarterly earnings press releases.
3) Depreciation for ACS provided by Avaya.
</FN>
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