Motorola Confirms $11bn General Instrument Buy

Computergram International, Sept 16, 1999

Motorola Inc confirmed Wednesday that it will buy General Instrument Corp for $11bn, as previously reported. The company denied allegations in yesterday's press that bids had been received from other companies, supposedly delaying an announcement. A spokesperson for Motorola believed that the leak to the press on Monday came from the company's brokers for the deal, Goldman Sachs. Motorola said the merger would position it as a leader in providing converged internet, telecommuncations and entertainment services, through a "home hub" set-top box. General Instrument's set-top boxes provide access to high-speed, digital services from cable operators.

Motorola said that Edward Breen, chairman and CEO of General Instrument, will lead a new Motorola business unit focused on integrated and interactive broadband access. The unit will include General Instrument's staff, assets, operations and the cable business of Motorola's internet and networking group. General Instrument has 7,800 employees and there will be "limited redundancies" according to a Motorola spokesperson. However, the company was not willing to say from which areas of the business this will be.

Marc Cabi, an analyst with Credit Suisse First Boston said: "Motorola's motivation is an attempt to secure a greater percentage of consumer spending on home communications." He added that the transaction, "could cloud other restructuring issues that the company needs to undertake." James Parmelee also of Credit Suisse said General Instrument's installed base provides Motorola with strong US and international presence and expects consolidation activity to heat up in the wake of this deal. The most likely candidates for acquisition are Scientific Atlanta Inc, Harmonic Inc, Antec Corp, Terayon Communications Systems and Com21 Inc, he said.

Motorola said the tax-free transaction will be accounted for as a pooling of interests merger. Motorola said it sees the merger "modestly" diluting earnings per share through 2000, but strengthening earnings per share after that. The company anticipates that the deal will be completed in the first quarter of next year, under which each General Instrument share would be exchanged for 0.575 shares of Motorola. The Schaumberg, Illinois- based consumer electronics maker closed down 6.9% at $86.75, on Wednesday, while Horsham, Pennsylvania-based General Instrument closed down 6.4% at $47.25.