M&A

Motorola Breaking Up into Handsets, Broadband

As a result, shareholders will hold shares in two independent and publicly-traded companies.
Stephen TaubMarch 26, 2008

Motorola announced on Wednesday that it would break itself into two independent, publicly-traded companies: Mobile Devices and Broadband & Mobility Solutions.

The creation of the two stand-alone businesses is expected to be accompanied by a tax-free distribution to Motorola’s shareholders. As a result, shareholders will hold shares in two independent and publicly-traded companies. Motorola’s stock jumped more than 3 percent when the markets opened for trading.

Greg Brown, Motorola’s president and chief executive officer said the move would provide “improved flexibility, more tailored capital structures, and increased management focus – as well as more targeted investment opportunities for our shareholders.”

Motorola’s announcement comes a few days before Philip Morris International is slated to be spun off by Altria Group Inc. Companies typically break themselves up as a way to isolate fast-growing business from their slower-growing ones, which tend to drag down the overall company’s stock price.

The split is expected to be completed in 2009. The struggling Mobile Devices unit makes and sells mobile-telephone handsets and accessories. The company said it’s looking for a new chief executive officer for the business.

The Broadband & Mobility Solutions arm comprises Motorola’s enterprise mobility, government and public Safety, and Home and Networks businesses.

The announcement comes ahead of Motorola’s May 5 annual meeting, which figured to be a showdown with Carl Icahn, the hedge fund owner and investor, who has proposed his own slate of four directors to the board.

On Monday, Icahn announced that he is filing a lawsuit to requiring Motorola to make certain documents about the Mobile Devices business available for inspection.