From start-up to an industry leader, how firm has moved on

Allan Leighton
Allan Leighton
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TV technology company Pace is to be sold to US rival Arris Group ​for over £1.5bn in a deal that is expected to safeguard Pace’s 500 UK employees and provide a bumper payout for investors.

Saltaire-based Pace said the takeover will allow the 33-year-old company to grow beyond its standalone potential.

Arris c​hief ​e​xecutive Bob Stanzione said the Georgia-based group is looking forward to working with “the talented and accomplished team at Pace”.

Arris has a very small presence in the UK at the moment so any synergies via job losses are more likely to come from the firms’ US operations.

Arris is expected to keep on the Saltaire base for its new UK operation, but the company’s headquarters will be in Suwanee, Georgia. It is not yet clear what will happen to the Pace brand name.

Pace shareholders will receive 132.5p in cash and 0.1455 new Arris shares for each share held, which was worth 426.5p per share when the deal was announced.

However Arris shares have been climbing rapidly on the US stock exchange, which means the price is now closer to 490p per share. At this level Pace would be worth around £1.6bn.

Pace shares leapt 35 per cent on Thursday to 447p, more than a 50 per cent premium to the price before the deal was announced.

The merged company will be incorporated in the UK, which will help Arris reduce the corporate taxes​ it pays in America ​from 37 per cent to around 27 per cent. Instead the UK treasury will benefit from the combined firms’ tax revenues.

Arris shareholders will ​own​ 76 per​ ​cent ​of the combined company, with Pace shareholders holding the ​remaining 24 per cent​.

Pace chairman Allan Leighton​ said: “​While the ​b​oard believes that Pace is strongly positioned to continue to execute its strategy in the medium and long term, we also believe that the proposed transaction substantially recognises that potential as well as giving our shareholders the opportunity to share in the future success of the combined group.

​“​The combination of the complementary Arris and Pace businesses will​​ create a platform for future growth above and beyond our standalone potential.

“We believe this is a great fit for both companies, our employees, customers and trading part-ners.​”​

Mr Leighton, the former Asda CEO, will be made redundant following the deal, but stands to gain over £1.5m if he chooses to cash in his shares.

It is not yet clear what will happen to Pace CEO, American-born Mike Pulli, who is credited with turning Pace around, although he stands to gain nearly £3m if he cashes his shares in.

The decision to offer shareholders both cash and Arris shares will give investors the option of claiming their windfall when the deal goes through or keeping a stake in the enlarged company.

Pace said the deal is in the best interests of shareholders and it will unanimously recommend that investors vote in favour of the deal at a general meeting to approve the merger.

Arris ​c​hief ​e​xecutive Bob Stanzione said the combin​ed company​ would be ​better placed to compete​ in an increasingly competitive market.

Mr Leighton told Pace shareholders at the group’s AGM on Thursday that the group has made a good start to the new financial year.

Between January 1 and April 22, revenue was higher than the previous year and th e group said demand is building in all its markets as the year progresses.

Pace said revenue will be stronger in the second half of 2015 than the first half, similar to 2014. Gross margins and profits rose in the first quarter.

Pace employs 2,000 staff and the enlarged group will have over 8,500.

​Pace Micro Technology ​was set up in 1982 by ​two ​Yorkshire businessmen​,​ Barry Rubery and David Hood​.

In the 1980s and early 1990s it focused on low-cost modems and analogue set-top​ ​receivers and in 1995 it became the first volume manufacturer of satellite set-top boxes.

​It floated on the London Stock Exchange in 1996.

In 1999 Pace bought out Acorn Computers’ set-top box operation and in 2002 it launched free-to-view personal video recorders.

Pace ​bought Philips’ set-top box business in 2008, the same year it shortened its name to Pace. In 2011 Allan Leighton became chairman​ and Neil Gaydon was replaced as CEO by Mike Pulli​.

Pace made its ​100 millionth digital set-top box​ in 2012.