Ups and downs

8 November 2018 By Robert Cyran Follow @rob_cyran

The private-equity shop made a killing on its CommScope LBO. Now it’s helping the embattled telecom-gear maker finance its $7.4 bln offer for Arris. The deal is highly leveraged and at the top of the cycle. Buying converts, though, gives Carlyle both protection and upside.

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CommScope said on Nov. 8 it had agreed to acquire Arris International for $5.9 billion, or $31.75 per share. Including debt the deal is worth $7.4 billion.

Carlyle Group is taking a $1 billion minority investment in CommScope as part of the company’s financing for the transaction. The private-equity firm will buy convertible preferred stock with a 5.5 percent coupon and $27.50 initial conversion price.

That equates to a 16 percent stake in CommScope, assuming conversion. Carlyle took CommScope private in a 2011 leveraged buyout, listed it on the stock market in 2013 and sold its final stake in November 2016.

The price represents a 36 percent premium to Arris’s stock price on Oct. 23, the final day of trading before reports of a potential transaction reached the market.

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