Pace to Buy Philips Set-Top Box Unit

United Kingdom-based Pace Micro Technology said Wednesday it will acquire the set-top box and connectivity solutions business of Royal Philips Electronics for up to $136.5 million.

The Philips STB and CS Business designs and supplies digital TV products including satellite, cable, terrestrial and IPTV set-top box products.

The Philips STB and CS Business has relationships with a number of pay TV operators, IPTV customers and a strong international retail business, Pace said. As part of this transaction, Pace will be entitled to utilize the Philips brand in retail distribution for an agreed range of products for the next three years.

Pace and the Philips STB and CS Business each have over 20 years experience in the set-top box market.The combined business will be a global top three set-top box company, Pace said.

"Based on 2006 performance, this deal will create a company with pro forma revenues of over $1 billion, producing approximately 8.5 million set top boxes a year,” said Neil Gaydon, CEO of Pace. “There is a strong strategic fit from customer, product, geographic, culture and scale perspectives. We have minimal customer overlap and the combined group will have a significantly enhanced technological position.”

Pace will issue Philips 68 million new Pace shares at competition of the deal and up to 1.9 million more shares after the deal closes and an additional $7.2 million three years after the close of the deal. Philips will own approximately a 22.5 percent stake of Pace.

The deal is classified as a reverse takeover under the London Stock Exchange rules and is conditional on the approval of Pace shareholders at a March meeting. The ordinary shares of Pace are suspended from trading until at least that time.

Pace Micro Technology www.pacemicro.com
Royal Philips Electronics www.philips.com

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