August 6, 2021

DealBook: What’s Behind the Hefty Motorola Breakup Fee

Google's headquarters in Mountain View, Calif.Ryan Anson/Agence France-Presse — Getty ImagesGoogle’s headquarters in Mountain View, Calif.

Google proved itself willing to pay up for Motorola Mobility, agreeing to buy the cellphone maker for $12.5 billion, a 63.5 percent premium.

But the search engine giant was also willing to offer a significant reverse termination fee to guarantee that it was committed to the deal.

Google’s deal contained a $2.5 billion reverse breakup fee, according to people with direct knowledge of the matter who spoke on condition of anonymity. That’s roughly 20 percent of the purchase price. Subtract Motorola’s $3 billion in cash on hand from the purchase price, and the fee constitutes an eye-popping 26 percent of Google’s total consideration.

That is well above normal. Reverse termination fees usually run 4 percent to 10 percent of any given transaction. (The fee terms will be disclosed when the companies file the merger agreement with the Securities and Exchange Commission.)

The most comparable payout provision of late is in ATT’s $39 billion takeover of T-Mobile USA, where the telecommunications giant agreed to a $3 billion breakup fee. ATT also included several roaming and spectrum agreements worth up to an additional $3 billion. All told, that consideration is only 15.3 percent of the entire deal.

In ATT’s case, the hefty fee is meant to show the company’s commitment to sticking with the deal through what has been a very rough antitrust approval process, with inquiries not only from federal regulators, but their state counterparts as well.

People with direct knowledge of the Google-Motorola talks say that neither side is concerned about antitrust risk in this deal. Because it represents vertical integration instead of horizontal consolidation — meaning that it isn’t putting together two direct competitors, as in the T-Mobile takeover — the two companies think the merger should pass regulatory muster.

But not all observers are as sanguine about that assumption. Florian Mueller, an intellectual property analyst and blogger, surmises that Google is still wary of any antitrust issues, given its previous deal hurdles.

Mr. Mueller also points out that Motorola is embroiled in patent litigation with two powerful foes, Apple and Microsoft. The former has sued other Android device makers, including HTC and Samsung; the latter has struck a settlement with HTC and is fighting Samsung in court.

Motorola appeared to hold weaker ground in its battles with Apple and Microsoft, according to the analysis by Mr. Mueller, and faced the possibility of costly setbacks or settlements.

At the same time, as DealBook previously reported, Motorola was in talks with other parties about potential deals for its patent portfolio. While the company didn’t run a formal auction process, it wasn’t shy about pitting would-be suitors against each other to elicit the most favorable deals, according to a person with direct knowledge of the talks.

Given that Google openly spoke about its need for a bigger patent portfolio, it’s possible that Motorola — holder of 17,000 issued patents and 7,500 patents under review — was in a healthy position to demand the big fee.

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General Mills to Buy Control of Yoplait

General Mills, which has held the American distribution rights to Yoplait since 1977, entered into exclusive talks two months ago with the private equity fund PAI Partners and the French dairy cooperative Sodiaal.

General Mills said on Wednesday that it would buy 51 percent of the company that runs Yoplait’s operations and 50 percent of the entity that holds the licensing rights to Yoplait, the world’s second-largest yogurt brand after Danone. Sodiaal will hold the remaining stakes in both entities.

General Mills expects the deal, which is subject to regulatory approval, to close in the quarter that begins at the end of May.

General Mills and Yoplait will also end an arbitration case over the American license, and General Mills will continue to market Yoplait yogurt under that license.

The deal follows months of tense and highly political negotiations involving members of the French government and the influential agricultural lobby, concerned about the loss of jobs in France.

The deal has received antitrust approval in the United States, the Federal Trade Commission said.

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DealBook: Nasdaq and ICE Unveil Official Bid for NYSE Euronext


11:51 a.m. | Updated with NYSE Euronext and Deutsche Börse statements

The Nasdaq OMX Group and the IntercontinentalExchange disclosed on Tuesday the full terms of their takeover bid for NYSE Euronext, in a move to allay concerns that they were not serious in pursuing the operator of the Big Board.

Seeking to ease worries that a deal would not win regulatory approval, the two companies said they would pay a $350 million break-up fee to NYSE Euronext if the takeover bid failed to win antitrust approval. The Nasdaq reverse termination fee is roughly comparable to the $357 million break-up fee provided for in NYSE Euronext’s agreement with Deutsche Börse.

The new details are meant to counter NYSE Euronext’s rationale for rejecting the offer in favor of a merger agreement with Deutsche Börse. NYSE Euronext derided the Nasdaq-ICE takeover proposal as “loosely worded” and “highly conditional,” and argued that the bid — especially its plan to merge the two biggest American stock markets — cannot survive antitrust approval.

Under the terms of the Nasdaq-ICE bid, Nasdaq will take over NYSE Euronext’s stock trading business, while ICE will buy its derivatives platform. It is the higher-priced of the two plans, offering $42.67 in cash and stock for every share, compared with Deutsche Börse’s offer of $35.29 in stock.

The two companies also said their lenders have officially committed to providing the $3.8 billion in financing needed to support the bid. Those banks include Bank of America, Nordea Bank, Skandiaviska Enskilda Banken, UBS and Wells Fargo.

“Our actions today demonstrate our commitment to pursuing this transaction and further illustrate exactly how our proposal is superior,” Robert Greifeld, Nasdaq’s chief executive, said in a statement. “It’s time to allow a reasonable and expeditious diligence process to begin.”

NYSE Euronext said in a statement that it is reviewing the Nasdaq-ICE offer.

Deutsche Börse said in a statement: “”We remain committed to our merger agreement with NYSE Euronext to create the world’s premier global exchange group. We believe this merger is the best possible combination in the industry.”

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