* Zebra to pay $3.45 bln in cash for the business
* To fund deal with cash on hand, new debt of $3.25 bln
* Zebra's shares down 11 pct
(Adds details, analyst comments, background; updates shares)
By Abhirup Roy
April 15 Barcode printer maker Zebra
Technologies Corp said it would buy Motorola Solutions
Inc's enterprise business, which makes rugged mobile
computers, tablets and barcode scanners, for $3.45 billion in
its biggest deal ever.
The deal will allow Zebra, whose products help companies
such as Amazon Inc track inventory and supply chains,
to enhance its portfolio through a range of Internet-connected
Zebra's shares fell 11 percent to $60.77 on the Nasdaq on
concerns the company's borrowings to fund the deal would be as
big as its market value of $3.44 billion as of Monday's close.
Zebra will finance the deal through a combination of $200
million cash on hand and $3.25 billion in debt, comprising a
credit facility and issuance of debt securities.
"It's an aggressive play by Zebra to fortify their position
in the entire AIDC (automatic identification and data
capture)space," Northcoast Research analyst Keith Housum said.
"It's a good long-term play but in the short term, I think
it's going to be challenging," Housum said, noting the large
debt and the fact that the enterprise business has struggled to
grow organically in the past two years.
The business, which accounts for about a third of Motorola
Solutions' total revenue, has suffered as clients delay orders
and cut spending.
Zebra, however, said it expected the deal to add to earnings
immediately after closing at the end of this year.
After the sale, Motorola Solutions will be left with its
core government and public safety business. It will also retain
its iDEN products portfolio, which is a part of its enterprise
"Upon closing of the transaction, we intend to return the
proceeds to our shareholders in a timely fashion," Motorola
Solutions Chief Executive Greg Brown said in a statement.
Morgan Stanley, the financial adviser to Zebra, is providing
a financing commitment for the debt.
Goldman, Sachs & Co and JP Morgan Securities LLC are
Motorola Solutions' financial advisers.
About 4,500 Motorola Solutions' employees will join Zebra's
workforce of about 2,600 as of Jan. 25.
Zebra's rivals in its printing business include
Hewlett-Packard, Epson and Lexmark, while
Ubisense and AeroScout are among its competitors in the
location tracking products business.
In October, Zebra launched Zatar, a Web-based software that
allows companies to deploy and manage devices and sensors
connected to the Internet, also called the "internet of things."
Zebra acquired Hart Systems, which provides Web-based
inventory management software to the retail industry, in
Global merger and acquisition activity has surged this year,
mainly in the technology industry. Deals worth about $618.4
billion have been completed, with a third of those in the
technology, media and telecom sector, according to Thomson
Motorola Solutions estimated its quarterly results below
analysts' expectations, saying volumes in its North America
government business were lower than expected and some orders in
its enterprise business were delayed.
The company estimated an adjusted profit of 50 cents per
share and sales of about $1.8 billion for the first quarter
Analysts on average were expecting a profit of 51 cents per
share on revenue of $1.88 billion, according to Thomson Reuters
Motorola Solutions' shares were down 1.3 percent at $62.92
in afternoon trading on the New York Stock Exchange.
Zebra estimated an adjusted profit of 88-91 cents per share
and sales of $287 million-$289 million for the first quarter.
Analysts on average were expecting adjusted earnings of 83
cents per share on sales of $281.6 million.
Both Motorola Solutions and Zebra are scheduled to report
their results in May.
(Additional reporting by Soham Chatterjee and Patturaja
Murugaboopathy in Bangalore; Editing by Kirti Pandey)