By Rory Gallivan
Shares in Pace PLC (PIC.LN) were up by more than a third in
London on Thursday after the British pay-TV and broadband equipment
company agreed to be bought by Arris Group Inc. (ARRS), for $2.1
billion in stock and cash.
The companies expect the deal to add between 45 cents and 55
cents to Arris's per-share earnings in the first year after the
acquisition.
Arris, currently based in Georgia, U.S., and Yorkshire,
England-based Pace both supply technology and equipment to
broadband and cable TV providers such as Comcast Corp. and AT&T
Inc. The two companies will have about $8 billion in pro forma
revenues and 8,500 combined employees globally.
"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," Arris Chief
Executive Bob Stanzione said.
"The combination of the complementary Arris and Pace businesses
will create a platform for future growth above and beyond our
standalone potential," said Pace Chairman Allan Leighton, adding
that Pace has made a good start to 2015, with revenue higher than
last year.
The new company will be incorporated in the U.K., with
operational and world-wide headquarters in Suwanee, Ga. As such, it
is a so-called tax inversion deal, in which a U.S. company moves
its tax home to a country where corporate taxes are lower. The deal
will reduce the company's tax rate to about 26% to 28%.
Arris will fund the deal through cash and debt.
The transaction has been approved by both boards.
Numis analyst Nick James said the deal, if approved, would ease
margin pressure on the two companies given their current
competition for business with customers such as Comcast and
AT&T. The deal could be blocked by competition authorities, he
said, rating the chances of the merger not going through at about
20%.
Pace shares at 1050 GMT were up 117 pence, or 35%, at 449 pence,
valuing the company at GBP1.42 billion ($2.12 billion).
Angela Chen contributed to this article.
-Write to Rory Gallivan at rory.gallivan@wsj.com; Twitter:
@RoryGallivan
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