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Next Level Weighs Motorola's Buyout Offer

Next Level Communications has formed a committee of independent directors to weigh a buyout offer from its majority stakeholder, Motorola .

In addition, the Rohnert Park, Calif., telecom gear maker has retained a law firm and is expected to bring in an investment bank to help review the offer and make a recommendation to stockholders.

Earlier this week, Motorola bid $30 million cash for the 26 percent of Next Level it does not already own.

The move is designed to allay concerns about Next Level's finances. Next Level has been hurt by lagging demand for its very-high-speed DSL equipment, which allows carriers to transmit broadband content over existing phone systems.

Schaumburg, Ill.-based Motorola acquired its Next Level stake through the purchase of General Instrument Corp. in January 2000. At the time, Motorola was making buys (as well as significant venture capital investments) to expand its presence and profits beyond handsets.

Since then, however, the telecom equipment market has been tripped by the economy. Carriers and communications providers have canceled or delayed orders, resulting in the failure of dozens of companies. Given this backdrop, Motorola provided Next Level with about $175 million in direct financing for operations and $30 million in guarantees.

But despite recently announced deals, Motorola worried that the company's stock price, which has languished below the market-required $1 per share mark in recent months, would cause potential customers to choose larger vendors.

The proposed purchase price represents a 14.4 percent premium over Next Level's recent closing price and a a 28.6 percent bump over the average closing price for the last 90 trading days.

If accepted, Motorola expects the deal to be completed in the first quarter.