Summary
Motorola Solutions, Inc. (MSI) has filed an 8-K report detailing the completion of its acquisition of Guardian Digital Communications Limited, the parent company of Airwave Solutions Limited. This acquisition was primarily funded through a new $675 million senior unsecured term loan facility, which closed on February 18, 2016. The loan is a bullet payment due in February 2019 and carries an interest rate based on either the Base Rate or Eurodollar Rate plus an applicable margin. The company also notes that its existing $2.1 billion revolving credit facility's borrowing capacity may be partially limited due to this new debt. From an investor's perspective, this filing signals a significant strategic move by MSI to expand its operations, likely within the UK public safety communications sector, given Guardian Limited's ownership of Airwave. While the immediate cash outlay for the shares was nominal (£1.00), a substantial net cash investment of approximately £700 million was made into Guardian Limited, funded by the new loan and cash on hand. This investment is earmarked to discharge certain liabilities of the acquired entity. Investors should monitor the integration of Airwave and its impact on MSI's financial performance and future growth, as well as the implications of increased leverage on the company's credit profile.
Key Highlights
- 1Motorola Solutions, Inc. (MSI) completed the acquisition of Guardian Digital Communications Limited, parent of Airwave Solutions Limited, on February 19, 2016.
- 2The acquisition was financed by a new $675 million senior unsecured term loan facility, entered into on February 18, 2016.
- 3The term loan matures on February 18, 2019, with principal payable in a single bullet payment.
- 4Proceeds from the term loan were used to finance the acquisition, related transaction costs, and for working capital/general corporate purposes.
- 5A significant cash investment of approximately £700 million was made into Guardian Limited post-acquisition, funded by the new loan and cash on hand, to discharge agreed liabilities.
- 6The company's existing $2.1 billion revolving credit facility may experience a partial limitation on borrowing capacity due to the new indebtedness.
- 7The new credit agreement includes a financial covenant requiring compliance with a leverage ratio of 4.25 to 1.00.