Light Reading

Pace Bids For Motorola Home

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
12/10/2012
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U.K. set-top maker Pace plc confirmed Monday that it has placed a bid for Motorola Mobility LLC 's Home business, which makes set-tops, cable modems and cable network access equipment. (See Pace Confirms Moto Bid .)

The Wall Street Journal reported last week that Google (Nasdaq: GOOG) had set a bidding deadline of Friday, Dec. 7, with offers expected to be in the range of $1.5 billion to $2.5 billion. In addition to Pace, Arris Group Inc. (Nasdaq: ARRS) and some private equity firms are also believed to have submitted bids. (See Google Sets Deadline for Motorola Home Bids .)



Industry sources told Light Reading Cable that any offers are likely to be towards the lower end of that reported range as bidders will likely be concerned about Motorola's outstanding litigation with TiVo Inc. (Nasdaq: TIVO). (See Does Google Have a Plan B? )

Pace said in a statement that it "has submitted an indicative, non-binding, proposal to Google in respect of a potential acquisition of its Motorola Home business," adding that discussions are "currently at a preliminary stage" and there's no certainty that a deal will be reached.

Pace said its proposal is classified as a "reverse takeover," because it's smaller than Motorola Home. Trading in Pace's ordinary shares have been suspended as of Monday afternoon and will re-commence when "sufficient information" on a potential deal is made available to shareholders or if negotiations break down.

Pace, which has been trying to build up its U.S. business for years, supplies set-top boxes to the nation's largest cable operator Comcast Corp. (Nasdaq: CMCSA, CMCSK), including the new hybrid QAM/IP X1 gateway and much simpler Digital Terminal Adapter (DTA) devices. Pace is also developing an all-IP HD client device for Comcast called the XI3. (See Meet Comcast's IP-Only Set-Top and Philly Next for Comcast's X1 .)

Pace ended the first half of 2012 with cash and cash equivalents of £78.4 million (US$125.96 million) and total assets of £1.35 billion (US$2.16 billion), so it will need some help financing a deal if it comes in the expected range. A source familiar with the process told Light Reading Cable that Google is willing to help a buyer secure a loan in the neighborhood of $1 billion.

Arris declined to comment on speculation that it had also made a bid for Motorola's cable business.

Why this matters
A successful bid would make Pace, already the world's largest set-top supplier, the leading player in the U.S. and enable it to expand into new areas of business, including cable modems, cable modem termination systems (CMTSs) and edge QAMs.

For more



— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
1/10/2013 | 4:00:15 AM
re: Pace Bids For Motorola Home


Bloomberg's reporting that Arris and Pace have put in the "most compelling" bids for the Moto Home business, and it's unlikely that a private equity bidder would emerge as the winner.  The other interesting wrinkle is that Google might retain some equity and the Moto Home patents.  I haven't heard about the equity piece, but the notion of having Google retain some or all of that IP has come up in my talks.


Not much of an impact on Arris shares today.. .they're up 8 cents (0.56%) to $14.37 each at last check (1:14pm ET). And Arris is not commenting on the latest bidding scuttlebutt. JB


 

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
1/10/2013 | 4:00:15 AM
re: Pace Bids For Motorola Home


As @techwzrd pointed out on the boards, TiVo and Pace are already partners, with Pace among the licencees for Pace's porting kit for gateways and boxes that will tie Pace hardware with TiVo's software/UI.  Will have to find out if that scenario could impact the pending litigation between Motorola and TiVo or if this still means Google would do well to get that settled before it can get a deal together. JB

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
1/10/2013 | 4:00:14 AM
re: Pace Bids For Motorola Home


Here's how Pace 'splained it in its release/statement:


"Pace can confirm that the potential acquisition of Google’s Motorola Home business would


be classified as a “reverse takeover” under the UK Listing Rules given its size relative to


Pace."  JB




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