CommScope IPO Connects Big Time

Oct.18.13 | About: CommScope Holding (COMM)

CommScope Holding Co (NASDAQ:COMM), a global provider of wireless, home and business network solutions with principal offices in Hickory, North Carolina, plans to raise $750 million in its upcoming IPO this month.

COMM will offer 38.5 million shares, including 20% insider shares, at an expected price range of $18.00-$21.00. At the midpoint of that range at $19.50 per share, COMM would command a market value of $3.8 billion.

COMM filed on August 2, 2013.
Joint Bookrunners: J.P. Morgan, BofA Merrill Lynch, Wells Fargo Securities, Deutsche Bank, Barclays, Credit Suisse, Goldman Sachs, Jefferies & Co
Co-Managers: Allen & Co, Raymond James, Evercore Partners, Mizuho Securities, SMBC Nikko, Drexel Hamilton

CommScope provides connectivity and infrastructure solutions for wireless, business enterprise and residential broadband networks. The firm offers radio frequency (NYSE:RF) solutions, intelligent connectivity and cabling platforms, data center and intelligent building infrastructure and broadband access solutions. The firm currently serves customers in over a 100 countries with its team of 12,500 people and 20 manufacturing and distribution centers; it also holds 2700 patents and patent applications worldwide.

COMM offers the following figures in its S-1 balance sheet for the six months ending June 30, 2013:
Net Sales: $1,745,548,000
Net Income: $17,021,000
Total Assets: $4,825,106,000
Total Debt: $3,016,693,000
Total Stockholders' Equity: $636,583,000

CommScope looks to be a solid buy in the proposed $18 to $21 range; the firm achieved profitability for the year of 2012, and has shown markedly better performance in the first half of 2013 than it did in the first half of 2012, posting income of $17 million as opposed to a loss of $11.4 million, respectively.

CommScope should be well-positioned to take advantage of the rapid expansion of data traffic resulting from the continued adoption of smartphones, tablets, machine-to-machine communication and the proliferation of data centers, Big Data, cloud-based services and streaming media content.

COMM faces heavy competition from other firms attempting to take advantage of the numerous opportunities presented by the expansion of data traffic. Some of these competitors are significantly better capitalized and have stronger resources than COMM. Major competitors include Amphenol Corporation (NYSE:APH), Belden Inc. (NYSE:BDC), Comba Telecom Systems Holding Ltd., Corning Incorporated (NYSE:GLW), Emerson Electric Co. (NYSE:EMR), Ericsson Inc. (NASDAQ:ERIC), Huawei Technologies Co., Ltd., KATHREIN-Werke KG, Panduit Corp., RFS (a division of Alcatel-Lucent SA) and TE Connectivity Ltd (NYSE:TEL).

Another significant concern for COMM is its massive indebtedness; after the offering is completed, the firm projects that it will still have approximately $2.5 billion in outstanding debt. Though it has achieved profitability, significant portions of its revenues will be headed towards debt service for the foreseeable future.

President and CEO Marvin S. Edwards, Jr., has been with CommScope and its affiliates since 2005; he took the title of President and CEO after the firm's recent acquisition, and had previously served as the firm's COO since 2010. He has also served as President and Chief Executive Officer of OFS Fitel, LLC and OFS BrightWave, LLC, and has previously served as President of North America Cable Systems with Alcatel.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Potential investors should read the S-1 and make their own decision and consult with their financial adviser.