Motorola to Buy Terayon for $140M

Motorola Inc. (NYSE: MOT) is to buy video processing vendor Terayon Communication Systems Inc. for $140 million in cash, the companies announced this morning. (See Moto to Buy Terayon.)

Cable Digital News reported last Friday that the deal was imminent and was on course to be announced today. (See Motorola Nears Deal for Terayon.)

But the market had expected a higher price. Motorola has agreed to pay $1.80 per Terayon share in cash, valuing the deal at $140 million. But the industry was expecting a deal above $2 per share, and that market talk had sent Terayon's stock up Friday to close at $1.84.

This morning's news has, not surprisingly, sent that share price down 10 cents, more than 5 percent, to $1.74. Motorola's share price is practically unchanged, up just 1 penny at $18.22.

Terayon has been in play for some time, but M&A activity around the company, which counted Cisco Systems Inc. (Nasdaq: CSCO) among its suitors, cooled early this year due to concerns about ongoing litigation issues. It did, however, clear a major legal hurdle earlier this month when the Securities and Exchange Commission (SEC) terminated an investigation into the vendor's financial affairs. (See Terayon Sweepstakes Stalls and SEC Scraps Terayon Investigation .)

Motorola, at least, seems comfortable with the current state of affairs, and expects to complete the takeover in the second or third quarter this year. It expects the deal to be neutral to earnings in the first year after the deal closes, excluding one-time costs. For 2006, Terayon reported revenues of $76.4 million and a net loss of $3.3 million. (See Terayon Sees Winter Slump .)

Should the deal close, Terayon will become the latest bolt-on to Motorola's expanding video delivery equipment portfolio. (See Moto Taps Tut for $39M and Motorola Gobbles Up Netopia.)

— Ray Le Maistre, International News Editor, Light Reading