TE Connectivity (TEL) Deal Would Be Accretive for CommScope (COMM), Says Goldman Sachs
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Goldman Sachs analyst Mark Delaney discussed a potential CommScope Holding (NASDAQ: COMM) and TE Connectivity (NYSE: TEL) deal in a research note Tuesday. Comments follow rumors CommScope is near an agreement to acquire TE’s Network segment for $3 billion.
"While there is modest sales overlap between TE’s Network segment and CommScope (primarily in DAS and to a lesser extent in cabling), the core of TE’s business in connectors does not overlap with COMM," said Delaney.
"As an illustrative example, based on our published estimates for TE’s Network segment, if the potential deal contributed for all of 2015, it would be about 45% accretive to EBITDA, 30-35% accretive to EBIT (assuming no synergies or divestitures), and about 15% accretive to EPS (assuming a 7% rate on $2.5 bn in incremental debt)," continued the analyst.
"Noting the same caveat as above, we estimate the potential divestiture would be 11-13% dilutive to FY15 EBIT (not assuming any use of proceeds and if the potential transaction contributed for all of FY15), and neutral to 4% dilutive to EPS (if TE used proceeds to repurchase stock). We estimate EBIT margins would expand from 16% to 17% (noting TE’s adjusted EBIT ex. Networks grew 12% yoy in FY13 and 20% yoy in FY14). Excluding Networks, we estimate Auto would represent 55% of total sales and Industrial would be 25-30%, should a deal take place," he added.
For an analyst ratings summary and ratings history on CommScope Holding click here. For more ratings news on CommScope Holding click here.
Shares of CommScope Holding closed at $21.61 yesterday.
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