As many on the Street have long expected, Google is finally getting rid of the Motorola set-top box business.
This afternoon, the cable infrastructure company Arris Group said it agreed to acquire Google's Motorola Home business - which consists mostly of the set-top box line - for $2.35 billion in cash and stock. Google had acquired the business as part of its $12.5 billion acquisition of Motorola Mobility in May 2012.
Under terms of the deal, Google will get $2.05 billion in cash and about $300 million of newly issued Arris shares, giving Google about a 15.7% stake in the company.
Arris said the deal will be significantly accretive to Arris' non-GAAP earnings start in the first full year after closing.The company noted that the deal will more than triple Arris' pro forma combined revenue for the trailing four quarters ended September 30.
“Our Home business has been a vibrant part of Motorola Mobility's portfolio, innovating while delivering strong financial performance,” Motorola Mobility CEO Dennis Woodside said in a statement. “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.”
Arris says 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 deal is expected to close by the end of Q2 2013.
Arris said the cash portion of the deal will be funded through debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada.
Arris holders sure do like the deal: in late trading, the stock has jumped $2.45, or 16.9%, to $16.99. Google shares are down $1.61, or 0.2%, to $718.50.
The sale of the Motorola set-top box business - once an independent company called General Instrument - is almsot certainly going to trigger renewed speculation about whether Cisco Systems will hold on to its own set-top business, once an independent company called Scientific Atlanta.