Some Investors Cautious on CommScope/Arris, Analyst Finds

Some investors are cautious on CommScope's $7.4 billion plan to buy Arris, an analyst found. Worries include debt that CommScope will take on, which executives have said shouldn't be a problem (see 1811080051), wrote Simon Leopold of Raymond James Wednesday. "The deal seemed to lack strategic rationale and was more about buying cash flow." In the minds of investors and the companies, Leopold told us, "the common strategic theme is broadband and traffic growth." Owners of CommScope securities "perceive the deal negatively because they think of ARRIS as just" a set-top box maker, Leopold wrote "It is not. About 40% of sales come from STBs, the products contribute a single-digit percent of profits. We see opportunities from the evolution of cable TV networks." The combining companies declined to comment.