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Google to acquire Motorola Mobility for $12.5 billion

In this May 11, 2011 file photo, attendees chat at the Google IO Developers Conference in San Francisco. Google is buying cell phone maker Motorola Mobility for $12.5 billion in cash Monday, Aug. 15, 2011, in what is by far the company’s biggest acquisition to date. (AP Photo/Marcio Jose Sanchez, File)

MOUNTAIN VIEW, Calif. – Google Inc. is buying cellphone maker Motorola Mobility Holdings Inc. for US$12.5 billion in cash. It’s by far Google’s biggest acquisition to date and a sign the online search leader is serious about expanding beyond its core Internet business.

Google (Nasdaq:GOOG) said Monday it will pay US$40 per share, a 63 per cent premium to Motorola’s closing price on Friday.

The California-based search engine giant and Chicago-area based smartphone maker (NYSE:MOT) said the blockbuster deal has been approved by the boards of both companies.

Motorola Mobility was separated from the rest of Motorola in January. The company has remade itself as a maker of smartphones based on Google’s Android software, but has struggled against Apple Inc.(Nasdaq:AAPL) and Asian smartphone makers.

The transaction could signal a wave of consolidations in the smartphone industry as players try to hook up manufacturing and software applications providers to compete more aggressively with each other.

This could put Canadian technology giant Research in Motion Ltd. (TSX:RIM) in play as a potential takeover target, especially since its shares are well below where they have traded in the past.

Google CEO Larry Page said that the deal with “supercharge the entire Android ecosystem.”

The deal gives Google direct control over the manufacturer of many of its Android smartphones.

In premarket trading, shares of Motorola Mobility Holdings Inc. are up 60 per cent, or $14.72, to US$39.19.

“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,” Page said in a release from Google headquarters in Mountain View, Calif.

“Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.”

Sanjay Jha, CEO of Motorola Mobility, said, Monday’s blockbuster deal “offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world.”

“We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses.”

The transaction is subject to customary regulatory and closing conditions and is expected to close by the end of 2011 or early 2012.

The acquisition dwarfs Google’s previous biggest deal, the 2008 purchase of DoubleClick for US$3.2 billion.

With files from The Associated Press