TE Connectivity to sell its Subcom business to Cerberus

TE Connectivity will sell its SubCom subsea communications business to Cerberus Capital Management for $325 million in cash.

SubCo, which is based in Eatontown, New Jersey, designs, manufactures, deploys and maintains subsea fiber optic cable systems. To date, SubCom has completed more than 100 cable systems and deployed over 610,000 kilometers of cable through its eight high-performance cable ship. The division has 1,400 employees.

TE Connectivity said its SubCom business was expected to contribute approximately $700 million in sales to fiscal year 2018 results, with a minimal contribution to profitability. TE will provide supplemental information with respect to the SubCom business when it announces its financial results for the fourth quarter of fiscal year 2018.

TE Connectivity plans to use proceeds from the sale for share repurchases.

"The SubCom business is a leader in the undersea telecommunications market, and distinctly different from the rest of TE's connectivity and sensor portfolio. We are pleased that with this transaction we increase our focus as a leading industrial technology company. It strengthens our business model; resulting in a stronger growth profile, reduced cyclicality, higher margins and a greater return on investment," said TE Connectivity CEO Terrence Curtin. "We appreciate the contributions that the SubCom team has made to our company and toward building a more connected world, and we expect that they will continue that important work in the future with Cerberus."

“SubCom is a recognized pioneer in the subsea fiber optic cable industry with a long track record of technology innovation and excellent project management and customer service,” said Michael Sanford, Co-Head of North American Private Equity and Senior Managing Director of Cerberus.

“The industry-leading solutions and services that SubCom delivers will become even more critical for global companies as demand for data and connectivity continues to grow rapidly. Through this investment, SubCom will become an independent, standalone business that is well-positioned to capitalize on the significant growth opportunities ahead.”