17:04 15 April in Motorola, Zebra

Zebra Technologies, a manufacturer of barcode, receipt, kiosk and RFID printers and supplies  announced today that they were buying Motorola Solutions’ handheld unit for $3.45B.

Philip Gerskovich, Senior Vice President for New Growth Platforms at Zebra, explained to me in a phone interview that the two companies have been working together for years. Zebra has printed the bar codes and RFID tags and Motorola has supplied the handheld scanners to read the codes. He said over the years they have often worked together on deals, so the combining makes a lot of sense.

Gerskovich said the deal gives Zebra access to the entire Motorola Solutions handheld scanner business including existing sales channels and customers, employees and intellectual property including patents.

Motorola Solutions’ 4,500 employees from the handheld division will be joining Zebra when the deal is completed.

While it’s unusual that the smaller company is buying the larger one, Motorola apparently wants to focus on their government and public safety communications business.

Gerskovich acknowledged that combining two companies in this fashion will be a challenge, and there will be lots of pieces to pull together, but says he believes the transition will be softened by the fact they have been working together so closely for so long.

“What’s exciting with complementary nature of product sets is that we will be able to create new products,”  Gerskovich told me. And he says a lot that will come in the burgeoning area of the Internet of Things, which he says is an area Zebra has been invested in for a number of years.

In fact, he says they have a cloud-based platform called Zatar, which has been built to take advantage of the Internet of Things. Gerskovich says when you combine Zebra’s ability to generate RFID and bar codes, Zatar’s platform to build applications and Motorola’s smart handheld scanning capability, you have an ideal platform for building and and deploying applications to take advantage of the data being generated by the Internet of Things.

Gerskovich explained part of this is because these Motorola scanners are more than just dumb readers. They are actually rugged smartphones built with a scanner and reader and running Android. He believes that Zebra and their customers can take advantage of that intelligence when building applications on the Zatar platform.

The combined companies have the potential to become a force in the manufacturing technology sector. The companies’ combined 2013 sales would have totaled $3.5B. As a stand-alone company, Zebra generated $1B in sales in 2013, so this increases their size and scope in a fairly dramatic way.

Interestingly, both companies are based in Illinois and according to the official release this is an all-cash transaction, which has already been approved by both boards of directors, but is still subject to standard regulatory approvals.

If all goes according to plan they expect to close the deal by the end of this year.