Tyco Electronics to Buy ADC Telecom – Analyst Blog

Tyco Electronics Ltd (TEL) has concluded an all-cash deal to purchase broadband equipment maker ADC Telecommunications Inc (ADCT) for $1.25 billion. The purchase price is $12.75 per share, 44% more than ADC’s closing price on July 12, 2010.

 

The acquisition will enable Tyco Electronics to expand its footprint in the consumer electronics market like smart phones, 3D television and video conferencing. ADC’s products include optic-fiber and copper cables as well as network access devices. The transaction is expected to close in the fourth quarter of 2010 and add 14 cents to the earnings per share in its first full year of integrated operation.

 

The acquisition marks the first significant investment by Tyco Electronics, from the time it was spun off from parent company Tyco International Ltd (TYC) in 2007, since the majority of its actions have been directed towards divesting businesses.

 

Fitch Ratings announced that Tyco Electronics Ltd.’s acquisition of ADC Telecommunications Inc. would not impact its ratings on Tyco’s debt. Tyco’s issuer default rating, senior unsecured revolving credit facility and senior unsecured notes would continue to be “BBB” with a positive outlook, signifying investment grade rating.

 

Tyco Electronics also reported preliminary third quarter earnings per share from continuing operations of 70 cents, topping consensus estimates. The company reported sales of $3.1 billion, an increase of 23% over the prior year quarter and up 4% sequentially. The company’s book-to-bill ratio was 1.06 for the quarter.

 

Tyco Electronics Ltd. provides engineered electronic components, network solutions, specialty products, and undersea telecommunication systems.

 

The company’s Network Solutions segment supplies infrastructure components and systems for telecommunications and energy markets. This segment provides components comprising connectors, above- and below-ground enclosures, heat shrink tubing, cable accessories, surge arrestors, fiber optic cabling, copper cabling, and racks for copper and fiber networks; electronic systems for test access and intelligent cross-connect applications; and integrated cabling solutions for cabling and building management. This segment also sells insulators, power measurement products, CATV accessories, network interface devices, raceway systems, and duct accessories.

 

The company’s Undersea Telecommunications segment designs, builds, maintains, and tests undersea fiber optic networks for the telecommunications, and oil and gas markets. Its products are sold in the Americas, Europe/the Middle East/Africa, and the Asia-Pacific.