8-KEarnings & ResultsLeadership ChangesMaterial Agreements+4

Motorola Solutions, Inc. 8-K Report, Material Agreement (Aug 5, 2015)

Filed August 5, 2015For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) has announced a significant strategic transaction with Silver Lake, a leading technology investment firm. The company entered into an investment agreement to issue $1 billion in principal amount of 2.0% unsecured convertible notes due 2020 to Silver Lake. This transaction is expected to close on August 25, 2015, and will provide MSI with substantial capital. In conjunction with this investment, Motorola Solutions also announced its intention to launch a modified "Dutch auction" tender offer to repurchase up to $2.0 billion of its common stock. The capital raised from Silver Lake will be used, in part, to fund this share buyback program, indicating management's confidence in the company's value and commitment to returning capital to shareholders. The agreement also includes board representation for Silver Lake, with two managing partners to be appointed to MSI's Board of Directors, signifying a potential for strategic guidance and oversight from a sophisticated investor.

Key Highlights

  • 1Motorola Solutions secures a $1 billion investment through the issuance of 2.0% unsecured convertible notes due 2020 to Silver Lake.
  • 2The company plans to launch a $2.0 billion modified "Dutch auction" tender offer to repurchase its common stock.
  • 3Proceeds from the Silver Lake investment will partially fund the planned share buyback program.
  • 4Silver Lake will gain board representation with two managing partners appointed to Motorola Solutions' Board of Directors.
  • 5The convertible notes are convertible into cash and, at MSI's option, shares of common stock at an initial conversion price of $68.50 per share.
  • 6The transaction includes customary covenants, standstill agreements, and conversion/transfer restrictions for Silver Lake.
  • 7The company also announced its financial results for the quarter ended July 4, 2015, alongside this strategic investment.

Frequently Asked Questions

The $1 billion investment from Silver Lake is primarily to provide Motorola Solutions with capital. A significant portion of these proceeds will be used to fund a planned $2.0 billion share repurchase program, demonstrating a commitment to returning value to shareholders and potentially signaling management's belief that the stock is undervalued.

The notes carry a 2.0% annual interest rate, are unsecured, and mature in September 2020. They are convertible into cash and, at Motorola Solutions' discretion, shares of common stock at an initial conversion price of $68.50 per share. The agreement includes provisions for anti-dilution adjustments and a make-whole adjustment for certain extraordinary transactions.

Silver Lake will receive board representation, with two of its managing partners joining Motorola Solutions' Board of Directors upon closing. This arrangement is subject to certain conditions related to Silver Lake's ownership stake and duration.

Yes, the Investment Agreement imposes certain restrictions on Silver Lake's ability to transfer or convert the notes into common stock, particularly in the first two years after closing. These restrictions have exceptions, including under specific stock price performance conditions or if the company undergoes a change of control.