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CommScope Successfully Renegotiates Lucent Deal

CommScope Inc. said it has restructured its deal with Japan's Furukawa Electric Co. Ltd. to buy a piece of Lucent Technologies' fiber-optic cable business.

Terms of the pact now call for CommScope to invest $203 million for a minority interest in the Lucent cable venture, officials said.

The transaction is expected to enhance CommScope's technology platform with access to key intellectual property and provide it with a strategic partner in optical fiber and fiber optic cable manufacturing, company officials said in a statement.

Last summer, CommScope had said it would pay a total of $650 million and enter into two joint ventures with Furukawa to buy Lucent's fiber-optical cable business. Lucent had announced that it would sell the unit to CommScope and Furukawa as part of a $2.75 billion purchase by Furukawa and Corning Inc. (NYSE:GLW) of Lucent's entire Optical Fiber Solutions Business, which includes the division's Optical Fiber and Cable business (including specialty and transmission), the Fiber Optic Apparatus and Premises unit, and the Specialty Fiber Devices business.

Specific terms of the transaction called for CommScope and Furukawa to form two ventures; one for the fiber cable portion of Lucent's fiber optic business, and one for the transmission fiber portion.

Under the new terms, CommScope will issue 10.2 million shares of its common stock to Lucent valued at approximately $203 million, based upon a $19.94 share price, which is the 10-day average closing price for the period ending November 6, 2001. CommScope will purchase an approximate 18% ownership interest in the fiber optic cable venture, which includes transmission fiber and cable manufacturing capabilities at a 2.9 million square foot facility in Norcross, Georgia, as well as facilities in Germany and Brazil and an interest in a joint venture in Carrollton, Georgia.

CommScope will also purchase an interest-bearing note of the venture for $30 million to finance a portion of the initial working capital needs until permanent financing of the venture is secured. The proceeds of the stock issuance to Lucent will fund both the acquisition of the interest in the venture and the purchase of the note.

While CommScope said it does not expect the investment to be accretive in the near term due to current conditions in telecommunications and the global economy, it believes the strategic partnership offers significant opportunities for long-term growth. CommScope first announced it wanted to renegotiate the pact late last month, citing the current economic environment and severe downturn in the telecom market.

CommScope is the world's largest manufacturer of broadband coaxial cable for Hybrid Fiber Coax (HFC) applications and is a supplier of high-performance fiber optic and twisted pair cables for LAN, wireless and other communications applications.

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Bob Woods is the managing editor of OpticallyNetworked.com.