Motorola Wants its Stock Back From Icahn

Motorola Solutions MSI revealed on Monday that it has agreed to repurchase a full $1.17 billion in stock from activist investor Carl Icahn. This move forms a significant part of MSI's $3 billion stock buyback program, and it will also see an Icahn representative resign from the MSI board. Back in 2007, Icahn bought a 1.4% stake in Motorola and then demanded a seat on the board. According to CNN, Icahn told MSI CEO Ed Zander that Motorola stock was vastly underrated, and he proposed that it spend around $12 billion to buy back shares at depressed prices. “Icahn said he wasn't particularly interested in serving on Motorola's board, in fact, and would drop his bid for a board seat if Zander would pursue a major buyback. During the conversation Icahn projected a serene sense that he'd mastered the art of enriching shareholders.” According to the Wall Street Journal, MSI is now paying $49.15 each for the 23.7 million shares, which is a 0.6% discount to Friday's closing prices. Practically the end of an era, Icahn was MSI's largest shareholder at the end of 2011, with a stake of 11.76%, or 38.3 million shares. Part of the original agreement with Icahn saw Vincent J. Intrieri, one of Ivahn's right hand men, take a seat on the MSI board but he will now resign that post. In January, the Motorola board authorized an addition of up to $1 billion towards the stock buyback program, a number which brought the total up to $3 billion. January also saw MSI report 4Q earnings that fell a full 37%, though that figure is deceiving with charges and the sales of the networks business masking what was in fact stronger than expected revenue growth. Back on February 16, around the time of the payroll tax extension bill, Jefferies released a research report that revealed that it had thought the addressable market for MSI will be $3-$5B over three years starting in 2013, in line with mgmt guidance. “The $7B budget is lower than prior $8B-$10B estimates but higher than the $5B budget proposed in December. Therefore we preliminarily think the addressable market could be at the mid-point to low-end of the $3-$5B range. Despite some investor fears that Raytheon will win a large amount of the business, we believe the vast majority will go to MSI.” That same day, Morgan Stanley said that MSI was likely to be a critical supplier to those build outs. “We estimate that there is about a 70% to 80% or "very likely" probability for the scenario.”