Icahn shows the value in activism with Motorola

The activist investor cashes out at the right time as the markets have bid up the stock.

By Trefis Feb 29, 2012 2:39PM
Carl Icahn's long-standing association with Motorola seems to be drawing to an end after Motorola Solutions (MSI) announced Monday that it has agreed to repurchase almost $1.2 billion worth of stock from the activist investor.

The deal was inked pursuant to the company's $3 billion stock-buyback plan approved in January. Following the settlement of the transaction, Vincent Intrieri, Icahn's representative on Motorola Solutions' board, will resign from his position. 

Motorola Solutions was formed early last year after Icahn aggressively sought to split Motorola into two units. The other more famous sibling is smartphone manufacturer Motorola Mobility (MMI).

Motorola Solutions Stock Break-Up

Motorola Solutions' stock has risen almost 30% since the split and is now about 11% ahead of our $45 price estimate (before the Icahn buyback). Icahn will receive a price of $49.15 per share, a premium of around 10% over our fair estimate for the company's business. We believe Icahn is cashing out at the right time as the markets have bid up the stock ahead of our intrinsic value estimates. The stock has risen almost 14% since its latest earnings call.


Given the low-risk nature of the company's business as it deals primarily in critical sectors such as public safety and emergency services, we believe the company will perform well in the future but the market upside to its current price is minimal.


Icahn is also looking at a huge windfall from his Motorola Mobility investment. Google (GOOG) will be acquiring Motorola Mobility this year after it secures all the regulatory approvals for $40 a share, a huge 63% premium to its market cap on the day the deal was announced in August. We have a fair price estimate of $22 for Motorola Mobility's business. The acquisition has already received the approval of regulatory bodies in Europe and the U.S., though Taiwan and Israel have yet to sign off on the deal.


Both the Motorola split and the Google acquisition were the handiwork of Icahn, who will be extremely pleased with the value he has created. He had argued strongly that Motorola should look to increase shareholder value by splitting the business first and then maximizing the value of its strong patent portfolio. With these moves, Icahn's activism has not only helped himself, but also other Motorola investors.

2Comments
Feb 29, 2012 11:55PM
avatar
shrimp roll-I owned TWA before Ichan and after Ichan took all the money I owned NOTHING of value.I also owned Marvel then Ichan came along and filled his pockets again,but he did offer shareholders the opportunity of buying the New Marvel stock for about 15$ above mkt price.
Carl Ichan SOOOOOOOKes
And there was never any investigation into his dealings.EVERYBODY is For Sale!
Feb 29, 2012 8:02PM
avatar

i see that carl icahn still has not lost his magic touch since the trans World Airlines days.

god bless him for splitting motorola and selling off there winning assets.

like TWA i am sure that "he could have got more".

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