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Motorola buys GIC
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September 15, 1999: 10:34 a.m. ET
Cable TV equipment maker to be acquired in $11B stock deal
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NEW YORK (CNNfn) - Motorola Inc. said Wednesday it would buy General Instrument Corp. (GIC), a maker of cable television equipment, for about $11 billion in stock.
The deal, expected since press reports surfaced about it Monday, unites a leading consumer electronics brand with the cable industry's top source for TV set-top boxes.
Under the agreement, each share of General Instrument (GIC) will be exchanged for 0.575 share of Motorola (MOT).
The $11 billion price is based on Motorola's Tuesday closing price of $93.1875 and General Instrument's 214 million shares outstanding. The deal values the Horsham, Pa.-based General Instrument at about $53.58 a share, about $3 higher than the stock's $50.50 closing price on Tuesday.
The merger creates a strong contender for increased market share in the Internet, telecommunications and entertainment services industries, the companies said.
"I think it's a great move for Motorola," said David Toung, an analyst at Argus Research. "GIC is the leading maker of cable set top boxes. Slap on the Motorola brand name and distribution and it's a real good move for Motorola."
Toung also noted that cable is becoming a major entry point into houses for Internet access. General Instrument's set-top boxes provide access to high-speed digital service from cable operators.
The company holds 90 percent of the world market in digital cable boxes and 60 percent of the older analog models.
Motorola is the No. 3 maker of semiconductors in the world and the largest producer of cable modems.
The Schaumburg, Ill.-based company, which makes high-speed modems and cellular phones, reported strong second-quarter earnings in July. But Motorola has struggled over the past year, taking a hit as one of the backers behind bankrupt satellite-phone maker Iridium.
Motorola said Edward Breen, chairman and chief executive officer of General Instrument, will lead a new Motorola business unit focused on integrated and interactive broadband access.
It will consist of General Instrument's people, assets and operations and the cable business of Motorola's Internet and Networking Group.
Motorola said the tax-free transaction will be accounted for as a pooling of interests merger. Motorola sees the merger "modestly" diluting earnings per share through 2000 but strengthening earnings after that.
--from staff and wire reports
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