Motorola weighs sale of TV set-top box unit

Motorola is considering the sale of its television set-top box and networking equipment division as part of the mobile-handset maker’s turnround plan.

The decision to explore a possible transaction comes as improving capital markets begin to spur a new wave of mergers and leveraged buy-outs, and US companies look to prune businesses that are not central to their strategies for a recovering economy.

Motorola hired Goldman Sachs and JPMorgan Chase to advise on its possible options for Home & Networks Mobility, which earned $467m during the first nine months of the year on $6bn of revenue, people familiar with the matter said. The process, which was first reported by the Wall Street Journal, remains at an early stage, the people said.

Analysts valued the division at $3bn-$5bn, suggesting a price tag several bankers said was near the ideal range for large private equity firms given the current state of the debt markets.

Seen as a reliable cash generator with a large installed base of customers, the set-top box unit is expected to draw interest both from buy-out firms and rival consumer electronics and networking companies.

IMS Health, a provider of prescription drug data, last week agreed to sell itself to TPG Capital and Canada Pension Plan’s investment board for $5.2bn in what is the biggest leveraged buyout this year. “There is capital out there,” one banker said.

Motorola unveiled plans in March 2008 to split itself into two separate publicly traded companies, bowing to demands from billionaire investor Carl Icahn. It delayed the division later that year as the financial crisis worsened.

Mr Icahn had argued that separating the mobile phone division from a two-way radios business that serves governments would unlock value embedded in each.

“We do not comment on rumour or speculation,” Motorola said in a statement. “Separation into two independent, publicly traded companies is the publicly stated long-term goal of Motorola. 

“We remain committed to the separation goal and continue to believe that it is the right strategy to position Motorola for long-term success.”

A sale would also mark the latest twist for a business that has already changed hands more than once in the past 20 years. The former General Instrument was bought by Forstmann Little in 1990, taken public and acquired by Motorola in 2000.

JPMorgan and Goldman Sachs declined to comment.