Pace, the UK-based set-top box manufacturer, is seeking to acquire privately-held US broadband services provider 2Wire for US$475m (£308m) in cash.
The deal would significantly boost Pace’s aspirations to expand beyond its traditional cable and…
Pace, the UK-based set-top box manufacturer, is seeking to acquire privately-held US broadband services provider 2Wire for US$475m (£308m) in cash.
The deal would significantly boost Pace’s aspirations to expand beyond its traditional cable and satellite market and into the US tier one telco sector.
While the transaction has been agreed by both the Pace and 2Wire boards as well as a consortium representing the majority of the target’s investors, including AT&T, Alcatel-Lucent, Telmex and Oak Investments, it remains subject to final shareholder approval as well as regulatory consent.
To finance the acquisition, Pace intends to use a combination of existing cash resources and new banking facilities. The company is currently in negotiations over the debt financing and remains confident of completing this prior to the issue of the transaction circular – anticipated within the next seven to eight weeks.
Neil Gaydon, chief executive of Pace, said 2Wire would help build on the group’s operations across the Atlantic and bolster its customer relationships with the big telecoms operators such as AT&T.
“This acquisition will strengthen our Americas business, extending Pace’s US market coverage with entry into the tier one telco market. We have built a strong position in the US with cable and satellite operators and 2Wire, with its expertise in the broadband residential gateway market, will enable us to address a full range of US operator requirements. 2Wire’s software and gateway expertise will further drive development of our home entertainment convergence strategy,” commented Gaydon.
Founded in 1998 by former members of PictureTel and Polycom, 2Wire offers broadband solutions whose products and services include residential gateways, multi-service media platforms, remote management systems, value-added services and customer support. The company reported revenues of US$667.4m (£426.2m) and gross profits of US$141.8m (£90.5m). Its balance sheet recorded gross assets of US$828.6m (£510.6m) at the end of December 2009.
According to Pace, the acquisition price is inclusive of 2Wire’s balance sheet at closing, which it expects to be around US$55m (£36m). Following the deal, the enlarged group is estimated to have a net debt of around £200m, which Pace plans to reduce through the combined business cash flows.
Through 2Wire’s strong foothold in the US telco gateway market, Pace believes the move will secure its position as number one provider of telco residential gateway devices in the US, and the number three globally. By 2014, it anticipates a 17% surge in the worldwide market for DSL and fibre-based gateways to US$6.7bn, from US$3.0bn in 2009.
Following the waiver of all conditions, Pace expects the transaction to close in the fourth quarter of the current
financial year.
Evercore Partners is acting as Pace’s financial adviser on the acquisition. JPMorgan Cazenove and RBS Hoare Govett are its corporate brokers.
