Vantiva to acquire CommScope Home Networks
October 3, 2023
By Colin Mann
Connected technology specialist Vantiva, formerly known as Technicolor, has entered into a call option agreement with comms technologist CommScope to acquire CommScope’s Home Networks division, a provider of devices that supply residential connectivity and video set-top box solutions.
The planned acquisition of CommScope Home Networks represents a transformational transaction for Vantiva, as it would significantly increase Vantiva’s Connected Home capabilities. In the last twelve months ending June 2023, CommScope Home Networks and Vantiva’s Connected Home generated $1.5 billion (€1.4bn) and €2 billion in sales, respectively.
“This planned strategic acquisition represents a unique transformative opportunity for Vantiva,” said Luis Martinez-Amago, CEO of Vantiva. “It will enable us to reinforce Vantiva’s Connected Home operations, accelerate our innovation roadmap and expand into new markets through additional commercial partnerships. From a financial perspective, the acquisition of Home Networks will substantially increase the scale of our business while also generating synergies, which will significantly strengthen our free cash flow generation potential. This will result in a value-enhancing transaction benefiting all stakeholders, including end-consumers, customers, employees, shareholders and lenders. Subject to various approvals, we will be thrilled to welcome CommScope as a shareholder in Vantiva and our new colleagues joining us from CommScope Home Networks.”
Following the acquisition, Vantiva would significantly expand its portfolio of clients, increase its footprint to key geographies, and enhance its capabilities for innovation as a result of the combination of best practices from both businesses, ultimately benefitting customers and strengthening Vantiva’s existing diversification strategy.
Vantiva would fully integrate Home Networks into its Connected Home division, improving operational efficiency through increased scale. As a result, the transaction is currently expected to generate in excess of €100 million in pre-tax cash synergies on a run-rate basis (estimated to be reached in fiscal year 2026), primarily driven by cost optimization initiatives and operational efficiencies. Cash impact from net synergies is expected positive from 2025 on. This synergy potential would significantly improve Vantiva’s cash generation, ultimately driving value creation for all stakeholders.
The Home Networks business has its origins in General Instrument in the latter part of the 20th Century, which acquired by Motorola, who subsequently divested the unit to Arris, which was itself taken over by CommScope.
Under the terms of the transaction, CommScope would receive:
- A stake in Vantiva at closing, representing a 25 per cent stake on a fully diluted basis, through a share capital increase reserved to CommScope as consideration for the Home Networks business being transferred to Vantiva;
- A maximum cumulative earnout of $100 million in cash contingent upon Vantiva (at constant scope) achieving an EBITDA equal or exceeding €400 miillion in a given fiscal year over the five years following the first full year after closing. Maximum payment in a year would be $50 million.
As a result of the transaction, CommScope would therefore become a welcomed key reference shareholder in Vantiva. CommScope would also have one representative join Vantiva’s Board of Directors, highlighting its commitment to and support for Vantiva’s strategy and the value creation potential associated with the transaction. In addition, CommScope would commit to an 18-month lock-up period with regards to the Vantiva shares received as part of the transaction.
“We are excited about the strategic opportunity to sell our Home Network business to Vantiva and become a key reference shareholder in Vantiva,” said Chuck Treadway, CEO of CommScope. “The combination of the two entities will create value for customers and other stakeholders and we look forward to supporting Luis and the rest of the Vantiva team in the execution of the combination and the potential value creation.”
Under the terms of the agreement, the acquisition is subject to Vantiva’s exercise of the call option following information and consultation processes with relevant employee representative bodies, which will be initiated as soon as possible.
Subject to the exercise of the call option, the capital increase reserved to CommScope will be submitted to the approval of the shareholders of Vantiva. RSM, acting as independent expert, has been appointed by Vantiva with the agreement of the Board of Directors to issue an opinion on the fairness of the financial terms of the transaction. The conclusion of the report of the independent expert mandated by Vantiva will be included in the information sent to shareholders prior to the holding of the shareholders’ meeting. When approved by the AMF, a prospectus describing the transaction will be made available to shareholders.
The transaction, which would be expected to be completed late Q4, would also be subject to the receipt of regulatory approvals and customary closing conditions.
The transaction has been approved by the board, in which main shareholders (Angelo Gordon, Bain Capital and Bpifrance) are represented, and supported by Briarwood the largest shareholder not part of the Board.