Motorola Mobility Faces Shareholder Lawsuit In $12.5 Billion Google Buyout


A Motorola Mobility shareholder has filed a lawsuit against the company and Google claiming that Google's $12.5 billion acquisition bid for Motorola Mobility was a low-ball offer and that Motorola Mobility was grossly undervalued in the deal.

Investor John W. Keating has filed a lawsuit on behalf of Motorola Mobility shareholders against Motorola Mobility, CEO Sanjay Jha and nine members of its board of directors, which claims board members breached their duty to investors and that Motorola Mobility and Google aided and abetted in that breach. Google and Motorola Mobility said the transaction has received approval by the two companies' respective boards, and it's expected to close by the end of this year or early 2012.

The suit also claims Google failed to offer a fair price on the deal, according to a Businessweek report. Google agreed to purchase Motorola Mobility for $12.5 billion in a cash deal that will pay Motorola shareholders $40 per share, a 63 percent markup on the stock's Aug. 12 closing price.

"The offered consideration does not compensate shareholders for the company's intrinsic value and stand-alone alternatives going forward, nor does it compensate shareholders for the company's value as a strategic asset for Google," Keating claimed in the suit, which he filed shortly after Google and Motorola Mobility revealed the acquisition plan this week.

The Motorola Mobility acquisition gives Google a strong foothold in the mobility market by giving Google a mobile hardware – smartphones and tablets – component with which to more tightly integrate its Google Android mobile operating system.

The deal also gives Google Motorola Mobility's massive cache of patents, which CEO Sanjay Jha said totals more than 17,000 with more than 7,500 pending. Google has been embroiled in patent litigation with major technology players Apple, Microsoft and Oracle over its Android operating system.

Motorola Mobility, which spun off of Motorola when the company split into two divisions in January, has seen mobile device sales rise after Motorola pledged its allegiance to Android, a boost that followed a streak of several disappointing quarters.

"Motorola has experienced an economic resurgence since separating into two separate companies," Keating wrote in the complaint, Businessweek reported. Keating added that Motorola Mobility share holders will now be unable to share the success the company has found since pairing with Android and spinning off as its own company.

In the second quarter Motorola Mobility reportedly sold 11 million mobile devices, 4.4 million of those were Android-based smartphones, while 440,000 were tablets. Motorola Mobility's second quarter smartphone sales represented a 63 percent increase over the second quarter of 2010, and tablet shipments rose 72 percent sequentially compared to the first quarter in 2011. Motorola Mobility's revenue hit $3.3 billion in the second quarter, an increase of 28 percent from the same period a year prior, while the Mobile Devices Business saw quarterly revenue of $2.4 billion, a 41 percent increase from the year prior.

Meanwhile, Google CEO Larry Page has said that more than 150 million Android devices have been sold via more than 30 manufacturers, more than 200 carriers and in 123 countries. Page said 550,000 Google Android devices, whether smartphones or tablets, are "lit up," or activated, each day