Summary
Motorola Solutions, Inc. (MSI) announced a significant financial event stemming from the merger of Sprint Corporation and Nextel Communications, Inc., which closed on August 12, 2005. As part of this transaction, Motorola exchanged its stake in Nextel for shares in the newly formed Sprint Nextel Corporation and cash. This strategic move is expected to result in a substantial after-tax gain of approximately $780 million for Motorola, which will be recognized in the third quarter of 2005. This gain represents a significant positive impact on Motorola's financial performance for the reporting period. While Motorola will receive a considerable benefit from this exchange, investors should note a lock-up provision. Motorola has agreed not to sell approximately 37.6 million of its newly acquired Sprint Nextel shares until at least December 31, 2006. This restriction impacts the immediate liquidity and potential market reaction to a portion of Motorola's newly acquired asset, though it also suggests a long-term strategic view of the Sprint Nextel investment.
Key Highlights
- 1Motorola will receive approximately 69.3 million shares of Sprint Nextel Corporation stock.
- 2Motorola will receive $46.3 million in cash.
- 3Motorola is exchanging approximately 54.7 million shares of Nextel Communications, Inc.
- 4Motorola expects to recognize an after-tax gain of approximately $780 million in Q3 2005.
- 5A portion of the Sprint Nextel shares (37.6 million) are subject to a lock-up period until at least December 31, 2006.