UPDATE: Philips today announced it has reached an agreement in principle to sell its Set-Top Boxes and Connectivity Solutions businesses, currently part of its Home Networks business unit within the Consumer Electronics division, to UK-based technology provider Pace Micro Technology. The announcement followed the earlier suspension of trade in Pace shares on the stock market.
Philips agreed in principle to divest the STB and CS businesses to Pace in exchange for 70 million Pace shares, after which Philips will become a 23% shareholder in the combined business, representing a market value of around €90 million calculated with the closing price of Pace shares on December 18. The transaction is expected to close in the first quarter of 2008 and is subject to approvals from Pace shareholders, the relevant regulatory authorities and Philips’ workers council.
The outcome of the transaction will result in the creation of one of the largest set-top-box players in the world at a time when the shift from analogue to digital TV is rapidly increasing. Commenting on the sale, Philippe Alcaras, business unit leader Philips Home Networks, said in a prepared statement: “We feel that the rapidly changing dynamics of the markets in which the STB and CS businesses operate will inevitably culminate in further industry consolidation. By striking a deal with Pace now, we gain the first-mover advantage and it shows Philips’ determination to secure a leading role for our businesses, and make them even more relevant to our customers and technology partners.”
Neil Gaydon, Pace chief executive officer, added there was strong strategic fit between the two customers with very little geographic overlap. “The Acquisition brings capabilities in IPTV, terrestrial, retail and connectivity products, which will extend the strong position we have built through relationships with leading payTV operators. We also believe there is potential for improved efficiencies by utilising the operating model and business structure we have built at Pace over the last two years.”
Generating estimated revenues of €425 million in 2007, the STB and CS businesses together employ approximately 335 people, predominantly based in France, who would transfer to Pace as part of the transaction. The remainder of Home Networks, Home Communications, which includes Internet Telephony and Home Telephony (DECT), will become part of the Peripherals & Accessories unit within Philips’ Consumer Lifestyle sector.