The proposed merger between Arris and Pace has hit a snag.

As the SCTE Cable-Tec Expo show wrapped up late last week, Arris released a statement explaining that regulators are looking for more information on the planned transaction, and that the company now believes the deal may not close until sometime during the first quarter of 2016. The merger, which was announced last April and expected to be completed before the end of the year, calls for Arris Group Inc. (Nasdaq: ARRS) to acquire Pace plc in a deal worth $2.1 billion. (See Arris to Acquire Pace for $2.1B.)

The Antitrust Division of the U.S. Department of Justice asked for more information on the Arris/Pace merger back in June, but now Arris says that it has also received requests for further details from governments in Brazil and Colombia. The international deal has so far received approvals in Germany, Portugal and South Africa.

In the US, Arris also notes that the DoJ now appears focused on "certain optical transmission products" as it reviews the corporate merger. Back in 2013, Pace acquired Aurora Networks, which had previously acquired cable access products from Harmonic Inc. (Nasdaq: HLIT). If the new deal is approved, those infrastructure solutions would add to Arris's existing portfolio of networking equipment.

However, the focus of attention on network infrastructure is noteworthy because the major financial impact of a completed merger between Arris and Pace would come from the combination of both companies' set-top divisions. As previously reported, set-tops represent roughly 75% of the combined total annual revenues of both vendors. As of the end of 2014, CPE represented only 69% of Arris's revenue, but 86% of revenue totals for Pace. (See Set-Tops Are Cash Cow in Arris/Pace Deal.)

Set-tops are also an important factor in the deal because of the way the pay-TV market is consolidating. Arris may see its set-top business for AT&T Inc. (NYSE: T) threatened as the telco stops investing in the U-verse TV platform. AT&T has already said that it is has a preference for the CPE brought in by DirecTV Group Inc. (NYSE: DTV), and that it wants to create a new converged platform based on that model. Since Pace is the set-top supplier for DirecTV today, Arris would pick up that business if its proposed buyout is approved, and it would position itself well to play a role in the updated service delivery platform that AT&T is considering for the future. (See AT&T Has Its Mobile Video Moment.)

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Regardless of where regulators place their concerns, Arris is now acknowledging that government agencies could put conditions on its deal to acquire Pace and possibly even require a divestiture. If that were to happen, then the final deal might not be as beneficial to Arris as originally thought.

Retaining a note of optimism, Arris chairman and CEO Bob Stanzione said in a statement: "While we are disappointed in the potential delay in the timing for completion, we believe that even if conditions are imposed, the transaction remains in the best interests of the shareholders. Based on our current understanding of the Antitrust Division's areas of continued focus and given the opportunities for the combined business and the potential synergies, we believe that the non-GAAP EPS accretion ranges for the first 12 months following the combination, previously estimated and disclosed by Arris, continue to remain possible."

— Mari Silbey, Senior Editor, Cable/Video, Light Reading