CommScope Holding Company, Inc., a global leader in connectivity solutions for communications networks, announced its plan to spin-off its Home Networks business and other initiatives to reduce operating costs throughout the Company.
Together, the planned separation of CommScope’s Home Networks business and operating expense reduction represent early steps in the Company’s CommScope NEXT strategy to optimize the business portfolio, drive above-market growth, and control costs. The separation is intended to be executed through a tax-free spin-off to CommScope shareholders to form a new and independent publicly traded company. The separation is expected to be completed by the end of the first quarter of 2022.
“Since I joined CommScope last October, the Board and management team have been undertaking a comprehensive review of our portfolio of assets and how each contributes to our long-term growth strategy,” said Chuck Treadway, president and chief executive officer.
“As we proceeded with this review, it became clear that the Home Networks business’ distinct strategy, growth characteristics, investment requirements and returns on invested capital are not aligned with the rest of our portfolio. We believe that Home Networks will be better positioned to deliver superior home and consumer-oriented products as an independent company. In addition, we are moving quickly to streamline costs to create greater financial flexibility to invest in our growth. We expect the cost reduction actions we are taking in core CommScope to, at a minimum, offset Home Networks’ adjusted EBITDA and create savings we can reinvest in our business, which should result in post-spin leverage
Treadway concluded, “With today’s announcements, our CommScope NEXT strategy is well underway, and, as we move forward, growth, cost control and portfolio optimization will continue to be our priorities. We remain excited about CommScope’s potential, and with the core elements of our strategy intact, we are confident in our ability to deliver innovative solutions for network convergence for customers around the world.”
The planned spin-off will allow CommScope and Home Networks to focus on innovation and pursue strategic market opportunities, accelerating growth and unlocking greater value for their customers. Key benefits of the separation include:
- Creating a clearer growth trajectory for CommScope, as well as greater opportunity for margin expansion, while focusing on providing market-leading solutions in wireless communications, broadband delivery and enterprise networking;
- Reducing complexity within CommScope, allowing it to focus on the core elements of the portfolio that will drive growth in the evolution of the networks it serves;
- Creating a standalone Home Networks business, a leading connected home solutions provider with an optimized cost structure and focused R&D and Sales teams, enabling an accelerated pace of innovation unlocking strategic value and growth in a “Connected Home” future;
- Providing Home Networks with greater focus and flexibility to develop its own technologies, go-to-market strategy and a best-in-class manufacturing model to better deliver home and consumer products; and
- Allowing CommScope and Home Networks to each pursue separate strategies, creating two distinct identities and more targeted investment opportunities, providing Home Networks with greater opportunities to access capital.
Following the completion of the spin-off transaction, CommScope will be composed of the following three business segments:
- Broadband Networks: Dedicated to serving the telco and cable provider broadband market as a leading equipment manufacturer. The segment is focused on growing its current portfolio and deployment of DAA and virtualized platforms and driving investments to expand fiber capacity, fiber connectivity and network orchestration.
- Venue and Campus Networks: Targeting both public and private networks for campuses, venues, data centers, and buildings. Venue and Campus Networks is focused on driving performance in its RUCKUS Wi-Fi 6 and cloud control platforms, ONECELL features to capitalize on 5G growth and virtualization, and driving high-density expansion in data centers.
- Outdoor Wireless Networks: Focused on the Macro and Metro Cell businesses and building metro cell power solutions and modularity design innovation. The segment is also working on the development of new technologies in cell site connectivity and other technologies to support telco carriers building their 4G and 5G networks.
CommScope will continue to be led by Chuck Treadway, president and CEO, and its current management team.
Home Networks, a leading provider of connected home, digital life, and entertainment solutions
With its long heritage of offering market-leading technologies and solutions, Home Networks will be well positioned to deliver superior home and consumer-oriented products and to unlock substantial value across its broad product lines and customer base.
Upon completion of the separation, Joe Chow, Home Networks senior vice president, will become the chief executive officer of the stand-alone Home Networks company. The Board of Directors, management, company name and headquarters will be announced after they are finalized. The new, independent company is expected to be listed on the NASDAQ stock exchange upon completion of the separation.
CommScope anticipates that the transaction will be in the form of a distribution to CommScope shareholders of 100% of the stock of Home Networks, a new, independent publicly traded company, which is intended to be tax-free to U.S. shareholders for U.S. federal income tax purposes.
CommScope currently expects the transaction will be completed by the end of the first quarter of 2022, subject to market, regulatory and certain other conditions, including final approval of CommScope’s Board of Directors. There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed.