CommScope's proposed $7.4 billion purchase of Arris International looks like one of the most unpopular mergers in recent memory. Shares of the Hickory-based communications networking and services provider declined 20% when the transaction was announced on Nov. 8 and were trading nearly 30% lower a month later. "The deal seemed to lack strategic rationale and was more about buying cash flow," Raymond James Financial analyst Simon Leopold said in a November report. To be sure, the disclosure came on the same day CommScope projected slower growth in 2019 than previously expected.
At about $17.75 in mid-December, CommScope trades near its $15 initial public offering price in 2013 and was down from a peak of more than $42 in 2017.
But it's never been too smart to bet against Frank Drendel, 73, who led CommScope from 1976 to 2011 and now serves as board chairman, and successor CEO Eddie Edwards, 69. Between 2007 and 2017, CommScope's revenues grew by 9% annually, bolstered by deals that added products and expansions into different applications. Buying Suwanee, Ga.-based Arris more than doubles CommScope's size and provides more diverse products as data consumption grows at exponential rates, company officials say. The transaction strengthens "Commscope's capabili ties to lead the coming network transformation," according to a company filing.
Arris, which gets more than a quarter of its revenue from cable television...