Announcement of revised acquisition terms, publication of prospectus and resumption of share trading
March 31 2008
Pace Micro Technology plc (“Pace” or “the Company”), a leading digital TV technology company, today announces the publication of a shareholder prospectus (the “Prospectus”) detailing its proposed acquisition of the Set Top Box Division and Connectivity Solutions Business (“the Philips STB and CS Business” or “the Business”) of Royal Philips Electronics (“Philips”) (the “Acquisition”) on revised terms agreed with Philips earlier today.
Copies of the Prospectus in relation to the Acquisition, originally announced on 19 December 2007, have today been posted to shareholders and will shortly be available on the Pace website. The existing shares in the Company, which have been suspended from trading, are expected to recommence trading from tomorrow, Tuesday 1 April 2008. The new shares to be issued to Philips are expected to commence trading upon completion of the Acquisition ("Completion").
Commenting on the Acquisition, Neil Gaydon, Chief Executive Officer of Pace said:
“We are very pleased to have reached a revised agreement with Philips to acquire its set-top box and connectivity solutions business. Following a rigorous process of due diligence and appraisal we are confident that the proposed acquisition represents a significant value-enhancing opportunity for both Pace and our shareholders.”
Key revised terms of the Acquisition
On 19 December 2007, Pace announced it had entered into an agreement with Philips to acquire the Philips STB and CS Business valuing it at up to €95 million (approximately £68 million) on a cash-free and debt-free basis.
As a result of changes in trading terms with certain key customers and a number of other matters that were identified after 19 December 2007, the terms of the transaction were amended under a settlement agreement signed by the parties earlier today, which included the reduction of the total consideration payable by Pace for the Philips STB and CS Business from up to €95 million (approximately £68 million) to up to €88 million (approximately £63 million).
Up to €83 million of the revised consideration (approximately £59 million) will be satisfied by the issue of up to 64,481,0491 new Pace ordinary shares ("the New Ordinary Shares ") to Philips, with the balance of €5 million being payable in cash (subject to the satisfaction of certain conditions).
At completion of the Acquisition, Philips will hold approximately 21.6% per cent. of the enlarged share capital of Pace2 ("Enlarged Share Capital"), with 17% of the Enlarged Share Capital subject to a one year lock-in from the date of Completion.
The agreement is conditional on, inter alia, Pace shareholders approving the Acquisition, which is to be sought at a general meeting of shareholders on 16 April 2008.
Summary background on the Philips STB and CS Business
The Philips STB and CS Business employs approximately 335 staff predominantly based in France and is a designer and leading supplier of a range of digital TV products including satellite, cable, terrestrial and IPTV set-top box products. For the year ended 31 December 2007, the Philips STB and CS Business generated revenue of €415.7m (approximately £328.3m).
The Philips STB and CS Business has long-established relationships with a number of key payTV operators in multiple geographies, major IPTV customers and an established international retail business. As part of this transaction, Pace will be entitled to utilise the Philips brand in retail distribution for an agreed range of products for up to three years from completion of the Acquisition.
Summary of the rationale for the Acquisition
Pace and the Business each have over 20 years’ experience in the set-top box market and they are two of the world’s leading set top box companies. Combined they will have a broader customer and product portfolio than that of the existing Pace Group.
The Directors expect there to be a number of key areas in which the operating and financial performance of Pace and the Philips STB and CS Business (together the “Enlarged Group”) will be improved as a result of the Acquisition:
- A broader customer base, with limited overlap
- Addition of new technologies and business streams to Pace
- Scope for operating improvements
- Margin improvements as a result of implementing the Pace operating model
- Opportunities for potential cost savings
The Board believes that the Enlarged Group has significant potential to further develop its position as one of the world’s leading set-top box companies with a global customer portfolio of major payTV operators. The engineering skill-set for the delivery of digital TV into the home will be extended and the Enlarged Group will be capable of creating products across more technology platforms than a number of its competitors. This will enable the Enlarged Group to extend its market reach into new technologies such as IPTV, into new geographies, including Latin America, and to grow its research capability by combining work in areas that are expected to drive the next stage of market development, such as home networking.
The Directors of Pace (the “Directors” or the “Board”) also believe the Philips STB and CS Business will bring a new cultural dimension to Pace including mainland European sales skills and relationships.
Pace will apply its proven operating model to the Business, which the Board believes has the potential to drive further growth in revenue and margins and deliver certain cost synergies to create value for shareholders.
For further information, please contact:
Pace Micro Technology plc +44 (0) 1274 532000
Neil Gaydon, Chief Executive Officer
Stuart Hall, Chief Financial Officer
Helen Kettleborough, Director of Corporate Communications
Rothschild
Scott Sheldon +44 (0) 207 280 5000
David Forbes +44 (0) 113 200 1900
Hoare Govett Ltd
Alexander Garton +44 (0) 207 678 8000
Brunswick Group LLP + 44 (0) 207 404 5959
Fiona Laffan
Sarah West
Tim Williamson
1 The maximum number of New Ordinary Shares to be issued is based on the average closing middle market quotation of a Pace ordinary share (as derived from the Daily Official List published by the London Stock Exchange) for the 10 business days prior to 19 December 2007, translated at the prevailing exchange rate on 19 December 2007 of €1.397:£1.
2 Assuming the maximum number of New Ordinary Shares is issued and no exercise of share options over existing Pace ordinary shares.
This announcement has been prepared by, and is the sole responsibility of, the Directors of Pace.
N M Rothschild & Sons Ltd, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser and sponsor to Pace and no-one else in connection with the matters referred to herein and will not be responsible to anyone other than Pace for providing the protections afforded to clients of N M Rothschild & Sons Ltd or for giving advice in relation to such matters.
This announcement does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefore.
This announcement may include "forward-looking statements". These forward-looking statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Pace, the Business or the Enlarged Group's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to products and services) are forward-looking statements.
Forward-looking statements are subject to risks and uncertainties and accordingly the actual future financial results and operational performance of Pace, the Business and the Enlarged Group may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those described in the Prospectus.
These forward-looking statements speak only as at the date of this announcement. Pace expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Listing Rules or Prospectus Rules of the Financial Services Authority or other applicable laws, regulations or rules.
The financial information set out in this announcement relating to the Pace Group does not constitute statutory accounts with the meaning of section 240 of the Act. The Reporting Accountants have given unqualified audit reports on the statutory accounts of the Company for the seven months ended 31 December 2007 and for each of the three financial years ended 2 June 2007, 3 June 2006 and 4 June 2005, within the meaning of section 235 of the Act. None of these reports contained any statements under 237(2) or (3) of the Act. Statutory accounts of the Company for the seven months ended 31 December 2007 and each of the three financial years ended 2 June 2007, 3 June 2006 and 4 June 2005 have been delivered to the Registrar of Companies in England and Wales pursuant to section 242 of the Act.
