Arris has agreed to buy rival set-top box maker Pace for US$2.1 billion (€1.95 billion), in a major deal that will see Arris expand globally and make a push into the satellite market.
The cash and stock agreement, which comes almost two years to the day after Arris completed its US$2.2 billion buyout of Motorola Home from Google, will help “open the door to Arris’ next stage of growth,” according to Arris vice-president of marketing Duncan Potter.
Speaking to DTVE this morning, Potter said that the combined organisation “will become a new entity and will operate globally under the Arris brand name.”
“We’re really looking to diversify Arris’ profits and our customer base, and especially our geographic presence,” said Potter. “The nice piece about that is that Pace has a very strong presence outside the US.”
Arris said that the Pace deal, which will give it a combined workforce of 8,500 employees globally, will “significantly enhance” Arrris’ international presence and provide “large scale entry into the satellite segment” – as well as a broader product portfolio in equipment, software and services.
Potter said that currently there “isn’t a lot of customer overlap” between Arris and Pace, particularly outside the US, and the deal will allow it to expand its presence in markets such as Latin America.
“We’ve identified the satellite market, which we believe is ripe for additional growth. Arris has [also] made no secret of its intention to move more strongly into the telco market, and especially the international telco market,” said Potter.
The deal will create a new holding company, “New Arris,” that will be incorporated in the UK, headquartered in Suwanee, Georgia in the US and is expected to be listed on the NASDAQ stock exchange under the ticker ARRS.
Arris said that there will be no change to the Arris board of directors and that Arris CEO Bob Stanzione and chief financial officer David Potts will retain their positions.
The post-closing structure will see Arris shareholders control 76% and Pace shareholders 24% of the new combined business. Pace shareholders will receive approximately 48.2 million shares of New Arris in aggregate.
Under the agreed terms, Pace shareholders will receive £1.325 of cash and a fixed exchange ratio of 0.1455 New Arris shares for each Pace share. This marks an aggregate consideration, as of April 21, 2015, of £4.265 per share – a 28% premium on Pace’s April 21 closing share price.
“The Pace directors believe that Arris’ offer recognises this value and also gives our shareholders the opportunity to share in the future success of the combined group,” said Allan Leighton, chairman of Pace.
“While we believe that Pace is strongly positioned to continue to execute its strategy in the medium and long term, we believe that the combination of the complementary Arris and Pace businesses will create a platform for future growth above and beyond our standalone potential.”
Arris CEO Stanzione said: “Adding Pace’s talent, products and diverse customer base will provide Arris with a large scale entry into the satellite segment, broaden our portfolio and expand our global presence. We expect this merger will enable Arris to increase its speed of innovation. We believe this is a tremendous opportunity for Arris and our customers, employees, shareholders and partners around the world as we collaborate to invent the future.”
Arris said that mutual discussions with Pace began in March, and that it expects the deal to close in the second half of this year. This will follow customary closing conditions, including Arris and Pace shareholder approval and regulatory approvals.
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