Pace diversifies with US$310m Aurora deal

British set-top box maker Pace plans to buy US fibre solutions firm Aurora Networks for US$310m to further branch out from pay-TV terminals.
The deal will be funded by a new five-year loan and is subject to a vote by Pace’s…

British set-top box maker Pace plans to buy US fibre solutions firm Aurora Networks for US$310m to further branch out from pay-TV terminals.

The deal will be funded by a new five-year loan and is subject to a vote by Pace’s shareholders.

SatelliteFinance understands two of its largest shareholders, representing around a third of the ownership, have already indicated they will approve the move.

Aurora makes optical systems used by fibre providers, and claims to be one of the world’s largest suppliers of optical transport and access network solutions to cable operators.

Pace chairman Allan Leighton said the acquisition fits its plan to grow a broader platform across hardware, software and services – a strategy that was originally laid out in late 2011, a difficult year for the group that saw floods in Thailand drag on profits.

“Acquiring Aurora will allow Pace to expand beyond our core business and build deeper and more embedded relationships with our customers, which the company believes will strengthen Pace’s  position as a market leading solutions provider for the pay-TV and broadband industries.”

The deal would also diversify Pace’s products as the traditional set top box business model faces increasing competition from increasingly sophisticated software and devices able to integrate TV with the internet.

Pace plans to acquire the group for a headline consideration of US$310m on a cash-free and debt-free basis, plus a further US$13m that is connected to tax benefits to be recovered over three years.

It said 15% of this headline consideration will be reserved for Aurora’s existing management and employees as a retention tool, as it plans to keep a management team that has delivered 30 straight quarters of profitability.

The deal represents an EV/EBITDA multiple of 10.5x before synergies and 8.2x after expected annual run rate synergies, based on results for the year to 31 March 2013.

A US$310m five-year amortising term loan will fund the deal, and Pace said it will take the opportunity to refinance existing debt by also taking out a US$150m five-year revolver.

HSBC and RBS are joint underwriters, bookrunners and mandated lead arrangers for the new financing facilities, with JP Morgan as lead arranger.

Pace also hired JP Morgan as sole financial adviser, sponsor and corporate broker.

It expects to close the acquisition before the end of the year.