Motorola Solutions to buy UK's Airwave for $1.24 billion

(Reuters) - Walkie-talkie and radio systems maker Motorola Solutions Inc (MSI.N) said it would buy UK-based communications company Airwave Solutions Ltd for 817.5 million pounds ($1.24 billion) to beef up its services business.

Shares of Schaumburg, Illinois-based Motorola were up 3.4 percent in extended trading on Thursday.

Airwave, owned by a fund of Australia's Macquarie Group Ltd (MQG.AX), provides voice and data communications to more than 300 emergency and public service agencies in Great Britain.

Motorola's sales have slipped as its major customers, which include police and fire departments as well as other government agencies, curtail budgets.

The company is trying to strengthen its services business - which provides communication services to governments, businesses and public safety agencies - to drive growth.

Activist investor ValueAct, Motorola's largest shareholder, said last month the company's shares were undervalued and that it would talk to its board about ways to enhance shareholder value.

Motorola Solutions said it plans to fund the purchase of Airwave, which has about 600 employees, with bank financing and cash on hand.

The deal is expected to add to adjusted earnings and free cash flow immediately after closing in the first quarter of 2016, Motorola said.

(Reporting by Abhirup Roy in Bengaluru; Editing by Siddharth Cavale and Anil D'Silva)