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Motorola Mobility Faces Suit Over $12.5 Billion Google Sale

August 16, 2011

(Updates with Google’s response in final paragraph.)

Aug. 16 (Bloomberg) -- Motorola Mobility Holdings Inc. and its chief executive officer, Sanjay Jha, were sued by a shareholder claiming they failed to get the best price when they agreed to sell the company for $12.5 billion to Google Inc.

Investor John W. Keating’s complaint, which was filed yesterday at the state courthouse in Chicago, also names Google and nine members of Motorola Mobilty’s board as defendants. The companies announced their agreement earlier in the day.

“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,” Keating claims.

Google, the biggest maker of smartphone software, agreed to purchase Motorola Mobility in a transaction that would pay Motorola shareholders $40 a share in cash, or 63 percent more than the stock’s closing price on Aug. 12.

The boards of Mountain View, California-based Google and Motorola Mobility, based in Libertyville, Illinois, approved the transaction, the companies have said.

If the acquisition receives U.S. Justice Department antitrust clearance, Google will also gain about 17,000 Motorola Mobility patents. The company has been embroiled in patent lawsuits worldwide with rival Apple Inc. -- the maker of the iPhone -- and Microsoft Corp., which has developed proprietary Windows Phone technologies.

Google handsets, made by Samsung Electronics Co., HTC Corp. and Motorola run its Android system.

11 Million Devices

Motorola Mobility, spun off from Motorola Inc. in January, sold 11 million devices including 4.4 million smartphones and 440,000 tablet computers last quarter, it said last month, reporting net revenue of $3.3 billion in the second quarter, a 28 percent increase from the same period a year earlier.

“Motorola has experienced an economic resurgence since separating into two separate companies,” Keating said in a complaint filed on behalf of all Motorola Mobility stockholders. “The Android smartphone technology it relies on continues to gain ground on Apple’s iPhone.”

Motorola Mobility shareholders now will be unable to share in the company’s future successes, he said.

Keating accused the individual board members of breaching their duty to investors and claims Motorola Mobility and Google aided and abetted that breach.

He is seeking class-action, or group, status for the case, an order declaring the agreement is unenforceable and an order barring the completion of the sale.

Jennifer Erickson, a Motorola Mobility spokeswoman, said the company hadn’t yet had an opportunity to review the complaint and that she and couldn’t comment on it. Google declined to comment, Katelin Todhunter-Gerberg, a company spokeswoman, said in an e-mail.

The case is Keating v. Motorola Mobility Holdings Inc., 11CH28854, in the Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

--With assistance from Brian Womack in San Francisco, Zachary Tracer in New York and Hugo Miller in Toronto. Editors: Glenn Holdcraft, Andrew Dunn

To contact the reporter on this story: Andrew Harris in Chicago at

To contact the editor responsible for this story: Andrew Dunn at

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