In a four-way transaction, Arris Group said it will sell Comcast approximately $150 million in stock in connection with Arris’s proposed $2.35 billion deal for Motorola Mobility's Home business with Google -- which will result in the cable company and Google each owning about 7.85% of Arris.
Arris will issue 10.6 million shares of common stock issued to Comcast. That will reduce on a share-for-share basis the number of shares of Arris stock to be issued to Google, while simultaneously increasing the cash to be paid to Google by $150 million, Arris said.
As a result of the sale to Comcast, Comcast and Google will each own approximately 7.85% of the outstanding Arris shares post-closing based on Arris’s current capitalization. Neither Comcast nor Google will have a board seat with Arris; under the original terms, Google wasn't going to have board representation either.
Comcast is Arris's largest single customer -- representing 33%, or $117.7 million, of Arris revenue for the third quarter of 2012 -- and with the addition of the Motorola Home set-top and video assets, the vendor will cover video, broadband and voice software and equipment.
"We are very pleased that Comcast has agreed to make this significant investment in Arris," Arris chairman and CEO Bob Stanzione said in a statement. "We believe this investment by one of our largest customers is a strong indication of customer support for the Motorola Home acquisition and its potential to accelerate innovation to the benefit of the industry and consumers."
If Arris had not opted to sell the stake to Comcast, Google would have held about 15.7% of Arris under the terms of the original agreement.
Neither the total amount of consideration paid by Arris for Motorola Home, nor the total amount of shares to be issued by Arris (now to Google and Comcast) will change as a result of this investment by Comcast.
The issuance of the shares to Comcast is conditioned on the closing of the Motorola Home acquisition and other customary conditions, Arris said. Arris’s acquisition of Motorola Home is expected to close by the second quarter of 2013, pending regulatory review.
Qatalyst Partners LP is acting as the lead financial advisor and Davis Polk & Wardwell LLP is acting as lead legal counsel to Comcast on this transaction. Evercore Partners is acting as lead financial advisor and Troutman Sanders is acting as lead legal counsel to Arris on this transaction; Bank of America Merrill Lynch also is advising the vendor.
On Google’s side, Barclays is acting as financial advisor and Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel.
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