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Pace shares soar after sale of Philips' stake in TV box maker
DUTCH electronics giant Philips yesterday sold its stake in set-top box maker Pace in a deal hailed as good news for both companies.
Philips netted 48m euros (42m) on the sale of its remaining 17 per cent stake, which it received when Pace bought its set-top box business last April.
Philips placed the stake of 50.7 million shares with investors at a price rumoured to be 135p, a 5p premium to Thursday's closing price.
Sources said the placing was oversubscribed and about 20 institutions took part. Shares in Saltaire-based Pace rose eight per cent on the deal, climbing 11.25p to close at 151.25p.
Analysts said strong interest in the placing was testament to the "fantastic" job done by management.
Philips had been tied in with a lock-in deal expiring on April 21, but Pace agreed to waive this to allow the sale a few days early.
Pace paid a revised 63m for Phillips' set-top box company about a year ago. The deal moved it into the world's top three set-top box companies.
The business, which employed about 330 staff and was based mainly in France, was rebranded Pace France. At the time analysts said it gave Pace critical mass and made perfect strategic sense.
As part of the deal, Pace was permitted to use the Philips brand for a range of products for three years.
Since then Pace has continued to grow, shipping 13 million boxes last year. Shares in Pace, which makes devices for BSkyB, Canal Plus and Comcast Corp, hit a seven-year high of 155p on April 8 after the company announced very significant upgrades to its 2009 outlook.
The group said it was benefiting from consumers opting for home entertainment rather than going out, and for the increasing popularity of high-definition television and personal video recorders.
The group now has more than 100 customers and ships to more then 50 per cent of the top 20 pay TV companies.
Noble analyst Arun George said he was not surprised by Philips' move, which nets the Dutch company more than a 50 per cent return.
"Investor appetite (for Pace) is quite strong," he said. "Looking at this financial year, another upgrade is on offer, especially on gross margins."
Paul Cornelius at Finncap said: "It's obviously good news for Philips to get cash in these uncertain times. And it's good news from a Pace perspective."
Pace declined to comment except to confirm the transaction, but is understood to be very happy with the deal. It is due to announce changes to shareholder register over the next few days.
"Pace has done a great job in turning this business around," said Dr Cornelius. "I think Philips got a lot more than they would have if it was a standalone business."
He said the sale also removes a cloud of poor sentiment, that had meant investors held off buying Pace shares in the hope they would be able to acquire part of the 17 per cent stake. "It takes away the uncertainty and overhang over the stake held by Philips," added Dr Cornelius.
"It's an absolutely fantastically well-run company and management are earning their stripes as we speak. Neil Gaydon will start to be a far more respected individual and chief executive going forward."
A Philips spokesman said: "We have always considered it as a shareholding as non-core to our operations. We are happy that we closed the deal."
Strong signals for high definition
Pace makes set-top boxes for 20 of the top pay TV companies including BSkyB, Canal Plus and Comcast Corp.
The group is benefiting from strong demand for high definition (HD) pay TV as people upgrade their television sets to take advantage of the latest technology.
The group estimates there is huge growth potential, with fewer than two per cent of households in western Europe subscribing to a HD TV service.
The group is also expected to benefit from the switch from analogue to digital, as many older televisions require a set-top box to receive a digital signal.
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Thursday 24 May 2012
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