Google just announced that it has sold Motorola Home, the broadband unit of Motorola Mobility to Arris, a broadband media technology company that specializes in design, engineering and supply of broadband services for residential and business customers. Arris will pay $2.05 billion in cash and approximately $300 million in newly issues Arris shares. With this, Google will own about 15.7 percent of Arris once the transaction closes.
“We share a similar vision and strategy with Arris for the industry’s migration to IP. The combination of our solutions, expert technologists and roadmaps promises to transform how service providers deliver the smart, simple connected home to consumers throughout the world,” said Marwan Fawaz, executive vice president of Motorola Mobility who leads Motorola Home.
For Google, the Motorola Mobility acquisition was obviously about the company’s mobile business and intellectual property. Motorola Home, despite Google’s recent Google Fiber efforts, probably didn’t quite fit into Google’s portfolio and was hence an obvious candidate for a sale — and indeed, there were reports this summer that Google was preparing to sell Motorola’s cable assets, and in the comments of this article, Arris was mentioned as a possible buyer. Google paid $12.4 billion for Motorola.
Here is the full press release:
ARRIS To Acquire Motorola Home Business For $2.35 Billion In Cash And Stock
Transformative Combination Creates Global Player In Innovative End-To-End Broadband Video SolutionsAcquisition Is Expected To Generate Significant Earnings Accretion For ARRIS, Increase Patent Portfolio, And Accelerate New Products To Market
SUWANEE, Ga. and MOUNTAIN VIEW, Calif., Dec. 19, 2012 /PRNewswire/ — ARRIS Group, Inc. (NASDAQ: ARRS), a global innovator in broadband media technology, and Google Inc. (NASDAQ: GOOG) today jointly announced that ARRIS and Motorola Mobility, a Google subsidiary, have entered into a definitive agreement under which ARRIS will acquire the Motorola Home business from Motorola Mobility, for $2.35 billion in a cash-and-stock transaction approved by the Boards of Directors of both companies. The acquisition will be on a cash-free, debt-free basis and is expected to be significantly accretive to ARRIS’ Non-GAAP earnings starting in the first full year after closing.
Under the terms of the agreement, upon closing of the transaction, Google will receive $2.05 billion in cash and approximately$300 million in newly issued ARRIS shares, subject to certain adjustments provided for in the agreement, representing an approximately 15.7% ownership interest in ARRIS post-closing.
Acquiring Motorola Home will enhance ARRIS’ ability to provide next-generation consumer video products and services, supporting a more comprehensive product offering while also accelerating its ability to deliver a comprehensive set of industry-leading new products for broadband to a wide spectrum of customers. The transaction will increase ARRIS’ patent portfolio and provide a license to a wide array of Motorola Mobility patents.
“This transformational combination of two complementary businesses will create a leading end-to-end provider of today’s video, data, and voice products and tomorrow’s next-generation IP-based broadband products,” said Bob Stanzione, Chairman and CEO of ARRIS. “Ever-expanding consumer demand for bandwidth will continue to drive growth across cloud and network technologies we provide that enable innovative home entertainment products and services.”
“Acquiring Motorola Home builds on ARRIS’ rich history, creating a global player with significant footprint, revenue and cash flow. It also adds expertise in video and a larger presence in the home to our core strengths in voice and data, ensuring we are even better positioned to capitalize on and manage the evolution toward multi-screen home entertainment. We look forward to working with the Motorola Home team as we integrate their complementary product portfolio and engineering expertise to accelerate best-in-class end-to-end solutions to a broader customer base and increase value for shareholders,” Stanzione continued.
Together, ARRIS and Motorola Home will have a global presence with over 500 customers in 70 countries, more than tripling ARRIS pro forma combined revenue to approximately $4.7 billion for the trailing four quarter period ended September 30, 2012. The combined entity will offer a wide array of products and solutions and will have an expanded customer base encompassing the full spectrum of broadband content and service providers.
“Our Home business has been a vibrant part of Motorola Mobility’s portfolio, innovating while delivering strong financial performance,” said Dennis Woodside, Chief Executive Officer of Motorola Mobility, the Google subsidiary that is the parent of Motorola Home. “The industry faces its biggest technology transformation, and together ARRIS and Motorola will be able to accelerate related innovations such as the introduction of the IP Connected Home environments that service providers need and that their consumers crave.”
“We share a similar vision and strategy with ARRIS for the industry’s migration to IP. The combination of our solutions, expert technologists and roadmaps promises to transform how service providers deliver the smart, simple connected home to consumers throughout the world,” said Marwan Fawaz, the Executive Vice President of Motorola Mobility who leads Motorola Home.
Motorola Home is a profitable business that generated revenues of $3.4 billion for the trailing four quarters ended September 30, 2012. The combination is expected to generate approximately $100 – $125 million in annual cost synergies.
The transaction is expected to close by the second quarter of 2013, subject to customary approvals and closing conditions.
The cash portion of the consideration to be received by Google at closing will be funded through debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada.
Evercore Partners is acting as lead financial advisor and Troutman Sanders is acting as lead legal counsel to ARRIS on this transaction. Bank of America Merrill Lynch is also advising ARRIS. Barclays is acting as financial advisor and Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel to Google on this transaction.
Update: In the analyst conference call, Arris CEO Bob Stanzione discussed TiVo’s lawsuit against Motorola and Google, saying that Google has agreed to cap Arris’ liability.
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