Earlier this week Google made a very generous, $12.5 billion bid on Motorola Mobility. It seems not all Motorola shareholders are thrilled about this price. Motorola investor John Keating feels that Motorola’s board didn’t try to get the best price possible and because of that he is suing the company over the deal.
The price Google offered for Motorola Mobility works out to a purchase price of $40 per share. That price is 63 percent higher than the current market value of the stock. Bloomberg reported that Keating essentially wants more, claiming,
“The offered consideration does not compensate shareholders for the company’s intrinsic value and stand-alone alternatives going forward, nor does it compensate shareholders for the company’s value as a strategic asset for Google.”
That complaint is just a little bit ridiculous. Keating is essentially arguing that shareholders should be compensated for the future. The shareholder wants to be compensated up front for how Motorola Mobility would have done in the future or how they will do when paired with Google. Mergers simply don’t work that way. It’s not as if Google is trying to cheap out here either. Offering 63 percent more per share than the closing price on the day the deal was made is incredibly generous.
Keating’s complaint was filed at the state courthouse in Chicago and names Google, 9 Motorola Mobility board members, Motorola Mobility CEO Sanjay Jha, as well as Motorola Mobility Holdings Inc. as defendants. Keating’s goal is to block the deal from going through. Reportedly the boards of both Google and Motorola Mobility have already agreed to the deal.
Neither Google nor Motorola Mobility has commented on the complaint. I will personally be surprised if this case actually finds its way into court. It’s hard to argue that your company didn’t pursue the best price when they are being offered a price per share so high above current market value.