Pace to acquire STB division of Philips

December 19, 2007 – Pace Micro Technology has announced that it has entered into a conditional agreement to acquire the set-top box (STB) and connectivity solutions (CS) business of Philips in exchange for 70mn Pace shares.

The proposed transaction values the business at up to €95mn, calculated with the closing price of Pace shares on December 18.  The deal is termed as a reverse takeover due to its size, and Philips will subsequently become a shareholder with approximately 22.5% of Pace shares.  Trading of Pace shares has been temporarily suspended as a result of the deal.  It is expected to close in the first quarter of next year, subject to approval by Pace shareholders, the relevant regulatory authorities and Philips’ workers councils.

“Based on 2006 performance, this deal will create a company with pro forma revenues of over US$1bn, producing approximately 8.5mn set-top boxes a year,” said Neil Gaydon, CEO of Pace.  “Pace and the Philips STB and CS Business combined technologies, expertise and customer reach will create a leading centre of excellence in the set-top box industry.  There is a strong strategic fit from customer, product, geographic, culture and scale perspectives.  We have minimal customer overlap and the combined group will have a significantly enhanced technological position.”

Philippe Alcaras, business unit leader for Philips Home Networks, added: “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.”

Pace will also be entitled to use the Philips brand in retail distribution for an agreed range of products for the next three years.  The combined business is expected to be one of the top three set-top box firms globally.