Vantiva — Set to buy CommScope’s Home Networks business

Vantiva (PAR: VANTI)

Last close As at 01/03/2024

EUR0.14

0.00 (2.94%)

Market capitalisation

EUR67m

More on this equity

Research: TMT

Vantiva — Set to buy CommScope’s Home Networks business

Vantiva has announced its intention to buy CommScope’s Home Networks business in exchange for CommScope taking a 25% stake in the enlarged group. The deal would significantly increase the scale of Vantiva’s Connected Home business, with combined revenues of $3.6bn (€3.4bn) in the 12 months to June 2023, enlarging its customer base and geographic reach. Run-rate cost synergies of $100m by FY26 have been identified and the deal (if it proceeds as intended) would accelerate the improvement in cash generation, so reducing the debt burden. An earn-out based on demanding EBITDA targets across FY25–29 is in place, capped at $100m. Completion is expected in Q423.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Vantiva

Set to buy CommScope Home Networks

Proposed acquisition

Technology hardware

4 October 2023

Price

€0.18

Market cap

€64m

Net financial debt (€m), IFRS basis at 30 June 2023

439

Shares in issue

355.4m

Free float

86%

Code

VANTI

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

Business description

Vantiva consists of two businesses: Connected Home, a leading global designer, developer and supplier of innovative products and solutions connecting consumers, and Vantiva Supply Chain Services, a global leader in the production of discs and associated logistical fulfilment.

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Vantiva is a research client of Edison Investment Research Limited

Vantiva has announced its intention to buy CommScope’s Home Networks business in exchange for CommScope taking a 25% stake in the enlarged group. The deal would significantly increase the scale of Vantiva’s Connected Home business, with combined revenues of $3.6bn (€3.4bn) in the 12 months to June 2023, enlarging its customer base and geographic reach. Run-rate cost synergies of $100m by FY26 have been identified and the deal (if it proceeds as intended) would accelerate the improvement in cash generation, so reducing the debt burden. An earn-out based on demanding EBITDA targets across FY25–29 is in place, capped at $100m. Completion is expected in Q423.

Year
end

Revenue
(€bn)

PBT*
(€m)

EPS*
(c)

DPS
(c)

EV/EBITDA
(x)

P/E
(x)

12/21

2.25

(126)

(61)

0

4.7

N/A

12/22

2.78

(497)

(197)

0

3.1

N/A

12/23e

2.64

(22)

(8)

0

3.5

N/A

12/24e

2.70

(14)

(4)

0

3.3

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The intention is that the deal is cemented through the issue to CommScope of shares representing 25% of the enlarged group, which we calculate at around 118.4m new shares. The deal is structured on a debt-free, cash-free basis and the new shares are subject to an 18-month lock-up period. Following the deal there would be an earn-out of a maximum of $100m (cumulative), contingent on Vantiva achieving EBITDA of at least €400m in any one given fiscal year after the first full year post closing, so in any one of FY25 through to FY29. Payment would be capped at $50m in any one fiscal year. For context, our current EBITDA estimate for Vantiva for FY24 is €151m. CommScope has reported a small loss at the EBITDA level for the last four quarters.

CommScope has been looking to separate its Home Networks business from the group and has been implementing a transformation plan but is less far along this journey than Vantiva. Both companies have been experiencing reduced demand from their Tier 1 customers over recent reporting periods, with high levels of inventory and continuing caution over end markets (see our August update). Vantiva has the slightly larger business, with revenues over the 12 months to June 2023 of €2.0bn to CommScope’s $1.5bn (€1.4bn). There is reportedly little overlap on the customer base, and as the inventory situation unwinds, we would anticipate a meaningful recovery in demand for both entities.

Vantiva’s main shareholders are represented at board level and are backing the transaction, as is the largest shareholder not on the board. All being well, a meeting to approve the deal will be held in December, with completion ahead of the year-end.

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General disclaimer and copyright

This report has been commissioned by Vantiva and prepared and issued by Edison, in consideration of a fee payable by Vantiva. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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