ARRIS Group, Inc, a specialist in broadband media technology, is set to acquire Pace Plc for US$2.1 billion in stock and cash.
The deal will result in the formation of New ARRIS, which will be incorporated in the UK and have its operational and worldwide headquarters will be in Suwanee, GA, USA.
New ARRIS is expected to be listed on the NASDAQ stock exchange under the ticker ARRS. Each current share of ARRIS will be exchanged for one share in New ARRIS.
The acquisition is expected to be accretive to ARRIS Non-GAAP earnings per share in the first 12 months following the acquisition.
ARRIS expects the deal to lead to an accelerated growth strategy with pro forma revenues of about $8 billion and a combined workforce of some 8,500 people.
The deal will also expand the two company’s product portfolio across equipment, software, and services.
One of the financial benefits of the deal is that it is expected to reduce Non-GAAP tax rate to about 26% - 28%.
Bob Stanzione, chairman and CEO of ARRIS, will hold the same positions at New ARRIS, and the current ARRIS board of directors will also maintain their roles at New ARRIS.
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"This transaction is another example of ARRIS's ongoing strategy of investing in the right opportunities to position our company for growth,” Stanzione said. “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. We expect this merger will enable ARRIS to increase its speed of innovation. We believe this is a tremendous opportunity for ARRIS and our customers, employees, shareholders and partners around the world as we collaborate to invent the future. We look forward to working with the talented and accomplished team at Pace."
Allan Leighton, chairman of Pace, said: “Pace Plc is a great company with a strong track record of pioneering innovation and excellent customer service. Through a combination of organic development and acquisitions, Pace has grown to be a leading technology solutions provider to the PayTV and Broadband industries serving cable, satellite and telco customers across the globe.
"Over the last three years, Mike Pulli and the wider Pace team have successfully executed against our strategic plan to develop Pace into a more distinctive, profitable and cash generative company, creating significant value for shareholders," he added.
“The Pace Directors believe that ARRIS's offer recognises this value and also gives our shareholders the opportunity to share in the future success of the combined group. While we believe that Pace is strongly positioned to continue to execute its strategy in the medium and long term, 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. We believe this is a great fit for both companies, our employees, customers and trading partners," he added.
The proposed transaction has been approved by the respective Boards of Directors of ARRIS and Pace and is expected to close in late 2015 after the satisfaction of customary closing conditions, including ARRIS and Pace shareholder approval and regulatory approvals.
Evercore is acting as lead financial advisor; Troutman Sanders is acting as lead US legal counsel and Herbert Smith Freehills is acting as lead UK legal counsel to ARRIS on this transaction. Bank of America Merrill Lynch is also advising ARRIS. J.P. Morgan Cazenove is acting as lead financial advisor and Travers Smith is acting as lead legal counsel to Pace on this transaction.