Google has finally found a buyer for Motorola Home, with US firm ARRIS confirmed to pick it up for US$ 2.35bn in a cash-and-stock transaction that looks set to boost its credentials as a provider of end-to-end broadband video solutions.
The deal, which has already been approved by the boards of directors of both companies, will see Google receive US$ 2.05bn in cash and approximately US$ 300mn in newly-issued ARRIS shares, giving an approximately 15.7% ownership interest in the latter after the deal’s conclusion, slated for the second quarter of this year.
ARRIS provides video headends and customer premises equipment (CPE) devices such as cable modems, and after the deal’s conclusion will gain access to a plethora of set-top box patents, as well as others held by parent company Motorola Mobility (bought by Google last year for US$ 12.5bn).
Motorola Home generated revenues of US$ 3.4bn for the 12 month period ended September 30th, 2012. The combination with ARRIS Group is expected to generate approximately US$ 100-125mn in annual cost synergies.
Despite its successful swoop however, there is a big job ahead for ARRIS if it is to wring full value from this acquisition: in the 14 months since Google acquired Motorola Mobility, its dominant position in the US set-top box market has been steadily eroded by rivals such as Cisco.
Colin Dixon, senior partner at US research firm The Diffusion Group, comments: “Notwithstanding the long time it has taken for the deal to close, Arris is a good home for the STB business. The company is well-known and respected by cable companies and has many complementary products including headend equipment and customer premises devices such as cable modems. We can only hope that it is not too late to win back some of the business that has been lost since last August.”
UK set-top box maker Pace was previously named as being a forerunner for the acquisition of Motorola Home – though would have been forced into making a “reverse takeover” under UK Listing rules due to its smaller size.