Motorola Solutions, the American maker of walkie-talkies and two-way radios, is alleged to have put itself up for sale earlier in the year but was unsuccessful in finding a buyer. The business as over $3 billion in cash but this week, received a major vote of support when Silver Lake, a private equity firm, invested $1 billion into the company. This has encouraged rumors that Motorola Solutions is considering taking itself private, although Motorola Solution’s Chief Executive, Gregory Brown has refuted this rumor and said that the company would continue to focus on growth. However, in the market, Motorola Solution’s second largest shareholder, Orbis Investment Management, has stated that it would support a “full and fair” offer for the business. Adam Karr, Orbis’ Managing Director, said this on the matter: “If there is (a) party out there that would like to acquire it in full, we would be in support of that, assuming that it is at a full and fair price.” Orbis Investment Management own 7.8% of Motorola Solutions.
This statement is perfectly normal for an investment business; their business is not in two-way radios but in making money (or a return) for their stakeholders and investors. Any deal at a “full and fair” price would almost certainly be at a price premium to the stock value as is trading on the market, and so Orbis would stand to make a healthy return on their investment. Now, this profit would have to be compensation for not receiving the dividends from Motorola Solutions over the coming years, which is one reason why the offer price is higher than the stock price. However, although it is logical enough for an investment business to support an offer, it does mean that any business considering buying Motorola Solutions has a potential ally, as any takeover requires the support of current shareholders. There is other support for a takeover; one investment analyst questioned by the source website reckoned that there was a 50% change of Motorola Solutions being sold to a private equity company by 2920. Motorola Solutions’ current market value is around $13 billion so a business looking to buy would need reasonably deep pockets.
As for Motorola Solutions’ plan with the $1 billion investment from Silver Lake? The business’ focus will be on higher growth areas, which are moving away from two-way radios and into video monitoring and analytics data services. Motorola Solutions has also said that it will use some of Silver Lake’s cash to buy back stock, which will concentrate the dividends (and so therefore investment returns) for other shareholders in the business. Although this is an effective way to boost returns for shareholders, it is somewhat unimaginative and can be one sign that management are out of ideas as to how to improve or maintain shareholder returns, which could be another sign that the business may be considering taking itself private.