Target: Motorola Solutions
Investment: $1 bln
Sponsor: Silver Lake
Financial advisers: Goldman Sachs & Co and J.P. Morgan (Motorola Solutions); DBO Partners (Silver Lake)
Motorola Solutions, whose shares were up 6 percent in early trading on Wednesday, also said it planned a $2 billion buyback.
The investment is one of the largest ever by Silver Lake, which led a $24.9 billion deal to take Dell Inc private in 2013.
The private equity firm will buy $1 billion of convertible senior notes due 2020 with an initial conversion price of $68.50 per share, Motorola Solutions said.
Silver Lake will also get two board seats when the deal closes. The board currently has eight members.
Motorola Solutions, which had a market value of about $12.6 billion as of Tuesday’s close, said it expected the investment to boost its business that includes video monitoring, data analytics and content management for “smart policing”.
The business accounted for 3 percent net sales of the company’s services unit, which in turn represented 35 percent of overall net sales in 2014.
“It shows Silver Lake does value MSI as a great strategic asset, not the ex-growth declining assets some observers described recently,” Bernstein analyst Pierre Ferragu said.
Raymond James analyst Travis McCourt said the funds from Silver Lake could also be used to make strategic acquisitions, while Northcoast Research analyst Keith Housum wondered whether the deal was a precursor to an eventual move to go private.
Motorola Solutions—unrelated to cellphone and set-top box maker Motorola Mobility, now owned by China’s Lenovo—has been cutting costs aggressively in the face of sluggish sales.
The company’s major customers include police and fire departments as well as other government agencies whose budgets have been squeezed in recent years.
Bloomberg reported in April that the company had failed to find a buyer after putting itself up for sale.
Goldman Sachs & Co and J.P. Morgan are financial advisers to Motorola Solutions, while Wachtell, Lipton, Rosen & Katz was legal adviser. DBO Partners was financial adviser to Silver Lake, and Simpson Thacher & Bartlett was its legal adviser.
Motorola Solutions’ net sales fell 1.8 percent to $1.37 billion in the second quarter ended July 4.
Up to Tuesday’s close of $60.22, the company’s shares had fallen about 10 percent this year.
Reporting by Devika Krishna Kumar in Bengaluru.