Mot To Buy General Instruments>
September 13, 1999
Motorola Is Negotiating Stock Deal
To Acquire General Instrument
By LESLIE CAULEY
Staff Reporter of THE WALL STREET JOURNAL
Motorola Inc. is in talks to acquire General Instrument Corp., a
cable-television-equipment maker, in an all-stock deal valued at about $10
billion, people familiar with the matter say.
Such a deal would unite one of the world's best-known consumer-electronics
makers with the cable industry's leading provider of TV set-top boxes,
marking the latest in a string of high-profile mergers that have roiled the
cable-TV industry and recast the competitive landscape. The mergers are
aimed at positioning the participants for a foothold in the emerging
"broadband" market for interactive voice, data and video services.
Under terms of the proposed deal, General Instrument stockholders would
get a little more than half of a Motorola share for each of their common
shares of General Instrument. In New York Stock Exchange composite
trading Friday, Motorola closed at $98.75 a share, up 6.25 cents, and General
Instrument ended at $52.50 a share, down 43.75 cents.
General Instrument's chief executive, Edward
Breen, is expected to remain as head of the
company, which would become a unit of
Motorola. Barring any last-minute snags, a deal could be announced as early
as this week, people familiar with the matter say. General Instrument and
Motorola declined to comment.
Getting a Boost
A deal with General Instrument would give Motorola a much-needed boost.
The Schaumburg, Ill., electronics company has been battered in the
marketplace during the past year as its earnings failed to meet Wall Street's
expectations, though in more recent quarters it has gained steam. Motorola's
reputation as a technology leader has taken a hit over Iridium, the
high-profile satellite-phone project whose principal backers include Motorola.
Iridium recently filed for bankruptcy-court protection. Motorola has
continued to defend the $5 billion project, even as Iridium's problems have
continued to pile up.
General Instrument, for its part, would benefit by being brought into the
Motorola family. Iridium missteps aside, Motorola has long been considered
one of the world's great technology leaders. The company over the years
has pioneered such technology hits as the car radio, cellular phones and
pagers. It is also a leading provider of semiconductors, an integral
component of set-top boxes, which would no doubt come in handy as
General Instrument continues to look for ways to cram more and more
functions into its set-top boxes.
Then there is the vaunted Motorola name, whose cachet far exceeds the
General Instrument logo in the general marketplace. According to people
familiar with the matter, the Motorola name would be used on General
Instrument's equipment, giving the gear a higher profile with consumers.
By aligning itself with General Instrument, Motorola would gain a valuable
partner in the emerging broadband market, which is widely seen as a gold
mine of future industry profits. Broadband, in cable-industry parlance, refers
to upgraded cable-TV lines that are capable of handling an array of digital
services.
General Instrument, of Horsham, Pa., has long enjoyed a special relationship
with the cable-TV industry. That owes in part to its close ties with such
cable notables as John Malone, the former chairman of
Tele-Communications Inc., and its own aggressive approach to the business.
General Instrument last year offered cable companies a piece of the
company in exchange for placing big orders for digital set-top boxes.
Other Suitors
TCI earlier this year was acquired by AT&T Corp. The deal left Mr.
Malone in charge of TCI's former programming arm, Liberty Media Group
Inc., which continues to be a major investor in General Instrument. Other
notable investors in General Instrument include Sony Corp., which has
around a 5% stake.
As General Instrument's star in the cable-TV-equipment field has risen
during the past few years, so has interest by a bevy of would-be suitors.
People familiar with the situation say the Motorola talks came on the heels
of talks with other companies that had sought to gauge its interest in a
partnership, joint venture or outright merger.
A marriage between Motorola and General Instrument could turn into a boon
for consumers. Motorola could use its expansive network of retail outlets to
help make cable set-top boxes as readily available to consumers as its
cellular phones.
The Federal Communications Commission has been pushing the cable
industry to make its set-top gear widely available through retail outlets. FCC
Commissioner Susan Ness, among others, hopes competition among retailers
would lead to better prices and products for consumers.
Cable companies, which have traditionally leased the boxes to consumers for
a monthly fee, have so far resisted. But they may not have much choice if
Motorola succeeds in getting into the retail game with any force.
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