19th Dec 2007 11:02
Pace Micro Technology PLC19 December 2007 Pace Micro Technology plc Pace agrees to acquire the set top box and connectivity solutions business of Royal Philips Electronics Pace Micro Technology plc ("Pace"), a leading digital TV technology company,today announces that it has entered into a conditional agreement to acquire theset-top box and connectivity solutions business ("the Philips STB and CSBusiness") of Royal Philips Electronics ("Philips") (the "Acquisition"). ThePhilips STB and CS Business employs approximately 335 staff predominantly basedin France and is a leading designer and supplier of a range of digital TVproducts including satellite, cable, terrestrial and IPTV set-top box products.The proposed transaction values the business at up to €95.0 million (£68.0m). Pace and the Philips STB and CS Business each have over 20 years experience inthe digital set-top box market. The combined business will be a global top threeset-top box company(1) with a strong customer and product portfolio. The Philips STB and CS Business has long-established relationships with a numberof key additional payTV operators in multiple geographies, major IPTV customersand a strong international retail business. As part of this transaction, Pacewill be entitled to utilise the Philips brand in retail distribution for anagreed range of products for the next three years. Commenting on the acquisition, Neil Gaydon, Chief Executive Officer of Pacesaid: "Based on 2006 performance, this deal will create a company with pro formarevenues of over US$1.0bn, producing approximately 8.5m set top boxes a year.Pace and the Philips STB and CS Business combined technologies, expertise andcustomer reach will create a leading centre of excellence in the set-top boxindustry. There is a strong strategic fit from customer, product, geographic,culture and scale perspectives. We have minimal customer overlap and thecombined group will have a significantly enhanced technological position. "The Acquisition brings capabilities in IPTV, terrestrial, retail andconnectivity products, which will extend the strong position we have builtthrough relationships with leading payTV operators. We also believe there ispotential for improved efficiencies by utilising the operating model andbusiness structure we have built at Pace over the last two years." Details of the proposed transaction(2) The proposed transaction values the business at up to €95.0 million (£68.0m).The consideration for the Acquisition will be satisfied by the issue of 68.0mnew Pace shares to Philips at completion and up to a further 1.9m new Paceshares on or shortly after completion together with a further €5m (£3.6m) incash over 3 years from completion. At completion, Philips will holdapproximately 22.5% per cent. of the enlarged share capital of Pace, of which17% is subject to a one year lock-in from the date of completion. There is alsoa cash adjustment mechanism based on the net indebtedness and working capitalposition of the Philips STB and CS Business at completion. The agreement isconditional upon, inter alia, the conclusion of the consultation procedure bythe Philips STB and CS Business with its Works Council in relation to theAcquisition, certain anti-trust approvals being obtained and Pace shareholdersapproving the Acquisition. The Philips STB and CS Business turnover and EBITDA for the year ended 31December 2006 were €357.2m and a loss of €39.3m, and for the year ended 31December 2005 were €473.6m and a profit of €16.4m respectively. Gross assets(3)as at 31 December 2006 were €100.9m. These figures have been extracted fromPhilips STB and CS Business management accounts, prepared under US GAAP, andwhen reconciled to Pace's accounting policies under IFRS may differ from thoseshown above. The Board of Pace believes that the operational performance of thePhilips STB and CS Business has improved significantly during 2007 over 2006,and will benefit further from increased efficiencies after completion. The PaceBoard will not alter and the senior management of the Philips STB and CSBusiness will remain within the enlarged group. The Acquisition is classified as a 'reverse takeover' under the Listing Rules byvirtue of its size and is as a result conditional, inter alia, on the approvalof Pace shareholders which will be sought at a General Meeting of Pace expectedto take place in March 2008 following posting of the requisite circular to Paceshareholders and publication of the prospectus. As the Acquisition is classifiedas a 'reverse takeover', the ordinary shares of Pace will be suspended fromtrading from the date of this announcement. The shares will re-commence tradingon the posting of the circular to shareholders and publication of theprospectus. Current Trading Pace's last market update on 19 October 2007 stated that Pace was on track tomeet the Board's expectations for the shortened financial year for the sevenmonths to 31 December 2007. The Board confirms that Pace continues to perform inline with its expectations for this financial period. In addition, the Board isconfident in the outlook and prospects for Pace for the year ending 31 December2008. Analyst and investor conference call A conference call for analysts and investors hosted by Neil Gaydon, CEO, andStuart Hall, CFO, will be held at 12:00pm UK time today. To access the call,dial +44 (0) 1452 561 263 and quote reference number 28833961. Slides will beavailable from the IR section of the Pace website - www.pacemicro.com - from11.45am UK time. A recording of the call will be available for replay from 1:30pm by dialling 0145 255 0000 and quoting reference number 28833961. For further information, please contact: Pace Micro Technology plc +44 (0) 1274 532000Neil Gaydon Chief Executive OfficerStuart Hall Chief Financial OfficerHelen Kettleborough Director of Corporate Communications NM Rothschild & Sons LtdScott Sheldon +44 (0) 207 280 5000David Forbes +44 (0) 113 200 1900 Hoare Govett LtdAlexander Garton +44 (0) 207 678 8000 Brunswick Group LLP + 44 (0) 207 404 5959Fiona LaffanTim WilliamsonRaphael Mazet About Pace Micro Technology Pace Micro Technology plc (pic.l) is a leading technology developer for theglobal payTV industry. Pace's main focus is on creating intelligent andinnovative products and services that benefit our customers and fuel thedevelopment of digital TV. Over the last 25 years, Pace has developed one of theworld's most experienced specialist engineering teams and is now the partner ofchoice for leading payTV operators across the globe. Pace's international headquarters are in Saltaire, West Yorkshire, UK, withfurther offices in the USA, France, India and Hong Kong. For more information onPace, please visit www.pacemicro.com. Disclaimer This announcement has been issued by, and is the sole responsibility of, Pace. N M Rothschild & Sons Ltd, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting as financialadviser and sponsor to Pace and no-one else in connection with the mattersreferred to herein and will not be responsible to anyone other than Pace forproviding the protections afforded to clients of N M Rothschild & Sons Ltd orfor giving advice in relation to such matters. -------------------------- (1) According to latest figures from IMS Research on global set-top box shipmentdata for 2006. (2) Acquisition consideration based on the 10-day average closing price ofPace's ordinary shares of 92.10 pence as of 18 December 2007. Foreign exchangerate of £1: €1.40. (3) Gross assets represent total current and non-current assets, as outlined inLR10 (UKLA) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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