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Arris lands the big fish of Motorola Home, Pace counts cost

By PETER WHITE

Published: 20 December, 2012

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In line with our predictions, Arris ended up as winner of the Motorola Home business, in a cash and shares combination which could tie up all of Arris' cash. The UK's Pace is left licking its wounds wondering if it is still the global market leader in set tops.

We said last week that Pace did not have the cash to make such a deal happen, and that it would have to move fast and try something off the wall. We also said that of the trade buyers Arris was the most likely candidate. The deal is now in concrete, priced at $2.35 billion, with Google keeping any debts that Motorola Home has.

The deal has been approved by the Boards of Directors, but we imagine will have to go to a shareholder's vote, although who is going to turn such a transformative deal down? Google gets $2.05 billion in cash and $300 million in newly issued Arris shares, leaving it with about 15.7% ownership in Arris post-closing. We did suggest last week that Google may need to take a shareholding in the buyer or keep some Motorola Home stock. Google can sell off the stock once the market stabilizes assuming there is demand for it. The cash portion of the purchase price will be funded through debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada. No mention was made of any side deals involving support for Google TV, but we suspect they may be there if you look hard enough. The combined entity is on target to be a $4.7 billion business this year, with a presence among 500 customers in 70 countries, which more than triples the size of Arris. The question is now whether or not Arris can use the Motorola name, and if so, for how long.

For the full version of this story, request this week's copy of our paid weekly service, Faultline, at www.rethinkresearch.biz/faultline or email sales@rethinkresearch.biz

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