Broadband equipment maker Arris Group Inc. (ARRS), Wednesday agreed to acquire Google Inc.'s (GOOG) Motorola Home business, TV set-top box maker, for $2.35 billion in a cash-and-stock deal.
The deal will enable Arris to provide next-gen consumer video products and supplement efforts to deliver a broader set of high-tech products for broadband. The deal will also scale up Arris' patent portfolio and provide a license to an array of Motorola patents.
Arris said the deal will be strongly accretive to its adjusted earnings starting in the first full year, after its closure in the second quarter 2013.
The deal mandates that upon closure, Google will receive $2.05 billion in cash and about $300 million in newly issued Arris shares - representing about 15.7 percent stake in Arris post-closure.
"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 Arris CEO Bob Stanzione.
Google brought Motorola Home business into its fold when it wrapped up Motorola Mobility for $9.8 billion in May. The business generated revenues of $3.4 billion for the trailing four quarters ended September 30.
Arris and Motorola Home will have a global presence with over 500 customers, more than tripling Arris pro forma combined revenue to about $4.7 billion for the trailing four quarter period ended September 30. The combination is expected to generate annual cost synergies of about $100 million to $125 million. Motorola Home rivals with Cisco Systems (CSCO) in supplying set-top boxes.
Arris said the cash portion of deal will be funded via debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada.
Evercore Partners is acting as lead financial adviser and Troutman Sanders as lead legal counsel to Arris. Barclays is acting as financial adviser and Cleary Gottlieb Steen & Hamilton LLP as legal counsel to Google.
Arris closed Wednesday at $14.54, down 0.27%, on the Nasdaq.
Google closed at $720.11, down 0.13%, on a volume of 1.9 million shares. In after hours, the stock dropped 0.22%.
by RTT Staff Writer
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