Tyco Electronics to use $1 billion of cash, $250 million of debt to acquire ADC Telecommunications

By Jennifer Lanning Drey

Portland, Ore., July 13 - Tyco Electronics Ltd. plans to use roughly $1 billion of its cash to help fund its planned $1.25 billion acquisition of ADC Telecommunications Inc., a provider of connectivity products for wireline, wireless, cable, broadcast and enterprise networks, Terrence Curtin, chief financial officer of Tyco, said during a company conference call held Tuesday to discuss the transaction.

Tyco will use debt to fund the remainder of the purchase price, Curtin said.

"The debt portion that we'll fund of this deal is similar to our overall balance sheet profile and therefore should have no effect on credit metrics," he said.

Tyco had $1.84 billion of cash at March 26, according to its most recent earnings release.

"We will continue to maintain a strong balance sheet with the resources to pursue additional strategic opportunities, and, of course, we'll continue returning capital to shareholders," Tom Lynch, Tyco's chief executive officer, said during the call.

Tyco estimates the acquisition will generate about $100 million of cost synergies once fully implemented, with about half of that amount occurring in the first year, Curtin said.

The deal is expected to be accretive to earnings in the first year post closing, excluding acquisition-related costs.

Strengthened networks solutions

Tyco has been focused on improving the operating performance of its core connectivity businesses since July 2007. The acquisition of ADC represents an important step toward strengthening Tyco's networks solutions business, Lynch said.

The combined company will offer a complete product portfolio across every major geographic market, according to a Tyco news release. The acquisition will also add ADC's distributed antenna system products, which will expand Tyco's wireless connectivity portfolio.

"This transaction positions us very well to take advantage of the continuing long-term evolution of the broadband network and to provide our customers around the world with the best connectivity solutions for their varying needs," Lynch said.

The transaction is structured as a tender offer to be followed as soon as possible by a merger.

Tyco expects to close the transaction in the fourth quarter.

Tyco Electronics is a Schaffhausen, Switzerland-based provider of engineered electronic components, network solutions, undersea telecommunication systems and specialty products. It has U.S. offices in Berwyn, Pa.

ADC is based in Eden Prairie, Minn.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.