Pace set for £1.4bn takeover by US group Arris, profits up in Q1

LONDON (ShareCast) - Pace (Other OTC: PCMXF - news) , the UK cable television set-top box maker, has agreed to be taken over by US telecommunications equipment manufacturer Arris in a $2.1bn deal and said profits in the first quarter were up on the prior year. Pace management have agreed that Arris will pay Pace shareholders 426.5p in cash and shares, a 28% premium to the closing price on Wednesday.

In order to help Arris reduce its corporate taxes, it has set up a new holding company for Pace, incorporated in the UK but headquartered in the US, listed on Nasdaq and called New Arris.

In a trading update statement, where Pace management publicly recommended the deal, chairman Allan Leighton said: "While the board 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. "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." Otherwise, Leighton said Pace made a good start to the new financial year, with revenue in the period from the start of the year to 22 April higher than the same period in 2014.

Forecast demand across all markets and product segments "is building as the year progresses", with revenue still expected to be stronger in the second half than the first.

Increased revenue, higher gross margins and lower costs all contributed to increased profitability in the period compared to the same quarter last year.

Regardless of the likelihood of the deal, which shareholders will discuss at the general meeting later on Thursday, the company continues to focus on its strategic plan, with customers launching new pay-TV hardware, software and 'integrated solutions'.