Taking a deep dive into Motorola Mobility’s merger proxy…

September 15, 2011

Ever since Google (GOOG) agreed to buy Motorola Mobility Holdings (MMI) for $12.5 billion last month, the deal has attracted a lot of attention. As we footnoted a month ago, Motorola Mobility CEO Sanjay Jha is set to walk away with more than $66 million once the deal closes. And as the NY Times’ DealBook reported yesterday, the deal was negotiated very quickly and Google raised its own initial bid, even without other third-party suitors involved.

But there are other fascinating details about the deal that we discovered after putting on the scuba gear and diving in to the preliminary merger proxy that Motorola Mobility filed late Tuesday. Most of these involve the astronomical fees, for doing what seems like very little work. Let’s just say that there are probably a few I-bankers who are probably buying very nice thank you gifts for all those special people in their lives.

For one, there’s the $2.5 billion reverse termination fee if Google can’t get government approval for the deal. And, on top of that,

“…if Google breached its obligation to use reasonable best efforts to obtain necessary antitrust clearances, Motorola Mobility may be able to seek additional damages from Google in an amount equal to $1 billion, in addition to the reverse termination fee of $2.5 billion.”

If Motorola Mobility doesn’t complete the deal, say, because another suitor comes along, they’re on the hook for $375 million. It’s hard for us to imagine how failing to move forward with this deal is worth $375 million, and certainly not $2.5 billion.

There’s also the Frank Quattrone angle, which DealBook detailed: The deal got a lot sweeter for Motorola Mobility after it hired Quattrone, whose new firm is called Qatalyst. Quattrone, working with Centerview Partners, seems to have convinced Google to up the ante by more than $3 billion.

But Quattrone likely didn’t do this out of the goodness of his heart. There are some pretty hefty fees involved, especially considering that Motorola Mobility hired Quattrone August 1 (when Google’s offer was $30 per share), and a mere 8 days later, the offer price was $40 per share. According to the proxy, Qatalyst Partners will be paid approximately $40 million if the merger is consummated. It got a $5 million opinion fee upfront, and it will continue to get an advisory fee of $1.25 million per quarter for each quarter before the deal closes. If the deal goes through, those fees “will be fully credited against the total fee.” Did we mention that this is for 8 days of work?

Centerview, meanwhile, got $3 million after it gave Motorola Mobility its fairness opinion, and it will receive another $9.5 million if the deal goes through.

As hard as it is to fathom those breakup fees, it’s even harder for us to figure out what could possibly be done over 8 days that is worth more than $50 million. Perhaps our friend, the Epicurian Dealmaker, can explain some of the math to us.

Image source: Ilse Reijs and Jan-Noud Hutten via flickr

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