Pace $2.1bn takeover extends tax inversion deals

Pace, the world's largest maker of TV set-top boxes, has agreed a $2.1bn takeover by Arris, a US networking equipment maker that will change its domicile to the UK in the latest transatlantic tax inversion deal.

The transaction shows that US companies are still willing to buy rivals that allow them to relocate to lower tax jurisdictions, six months after the Obama administration launched a crackdown on so-called inversions.

Following the merger the company, which will be renamed New Arris, will be incorporated in the UK but its operational headquarters will remain in Suwanee, Georgia and the company will be listed on Nasdaq.

Arris will pay Pace shareholders 426.5p in cash and stock, a 28 per cent premium to the closing price on Wednesday.

Shares in Arris jumped 25 per cent to $38.21 in after-hours trading as investors welcomed a deal that will bring down the US group's tax rate to about 21 per cent compared to 35 per cent in the US.

Bob Stanzione, chairman and chief executive of Arris, said the deal would increase the pace of innovation and growth at the combined company.

"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," he said.

Pace, based in Saltaire in Yorkshire, is one of the UK's few global technology groups. The London-listed company already has a strong presence in the US, thanks to partnerships with subscription TV providers such as Comcast, DirecTV and AT&T. But it has also secured a firm foothold worldwide through deals with Brazil's Oi SA and Sky Italia.

"We believe this is a great fit for both companies, our employees, customers and trading partners," said Allan Leighton, chairman of Pace. "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."

Analysts have been concerned whether it can continue growing in its core television business, as consumers change their viewing behaviour, moving to watching online video and on mobile devices away from their TV sets.

But in January, the group was able to boost its projections for its 2014 financial performance, saying that adjusted earnings before interest, tax and amortisation for the full year would be up by a quarter from 2013 to $240m, with revenues increasing by 6 per cent to $2.6bn.

At the time, Pace chief executive Mike Pulli, who has been in the role since 2011, said the company was considering more acquisitions as a way of securing a larger market share and further growth internationally. In October 2013, the company acquired the US equipment maker Aurora Networks in a deal worth $310m.

Washington's backlash against deals where US companies use a foreign takeover to lower their corporate tax bills caused at least one major agreed deal - US pharma group Abbvie's takeover of its UK rival Shire - to fall apart and slowed the pace of inversions.

However, some such deals are still taking place. They include Steris Corp's $1.9bn takeover of the UK's Synergy Healthcare and the recent merger between Cyberonics of the US and Italy's Sorin to form a medical devices company with a combined equity value of nearly $3bn.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation