ARRIS Group, Inc. (NASDAQ: ARRS) will buy the Motorola Home business from Google’s Motorola Mobility subsidiary, the two companies announced. The $2.35 billion cash-and-stock transaction has been approved by the Boards of Directors of both companies.
ARRIS asserts the acquisition will be on a cash-free, debt-free basis and likely will be “significantly accretive” to non-GAAP earnings starting in the first full year after closing, an event expected to occur in the second quarter of 2013. In fact, the company estimates the new assets will result in a more than three-fold increase of ARRIS pro forma combined revenue, to approximately $4.7 billion, for the trailing four quarter period ended September 30, 2012.
Google will receive $2.05 billion in cash and approximately $300 million in newly issued ARRIS shares, (subject to certain adjustments) for Motorola Home. Google will own approximately 15.7% of ARRIS once the deal completes. The cash will be funded through debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada.
As its name implies, Motorola Home specializes in home networking equipment, including broadband access devices. ARRIS says the acquisition will expand its ability to support the delivery of consumer video products and services. The deal also will increase ARRIS’s patent portfolio and provide a license to several 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’s rich history, creating a global player with significant footprint, revenue, and cash flow,” Stanzione continued. “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.”
“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.
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