Philips sets the pace for digital TV showdown

19 Dec 2007

Philips Electronics is to sell its set-top boxes and connectivity solutions businesses to British company Pace Micro Technology.

Philips agreed in principle to divest these businesses, currently part of Philips’ Home Networks business unit within the Consumer Electronics division, to Pace in exchange for 70 million Pace shares. Upon completion of the sale, Philips will become a 23pc shareholder in the combined business, representing a market value of around €90m calculated with the closing price of Pace shares on 18 December. The transaction is expected to close in the first quarter of 2008 and is subject to approval from Pace shareholders, the regulatory bodies and Philips’ workers council.

The outcome of the transaction will result in the creation of one of the largest set-top-box players in the world, just as the TV industry is heading into a transformative period as the shift from analogue to digital TV increases rapidly.

“We feel that the rapidly changing dynamics of the markets in which the set-top boxes and connectivity solutions businesses operate will inevitably culminate in further industry consolidation,” said Philippe Alcaras, business unit leader, Philips Home Networks. “By striking a deal with Pace now, we gain the first-mover advantage and it shows Philips’ determination to secure a leading role for our businesses and make them even more relevant to our customers and technology partners.”

The set-top boxes and connectivity solutions businesses together generated estimated revenues of €425m in 2007 and they employ approximately 335 people between them, mostly in France. These staff will transfer to Pace as part of the transaction. The remainder of Home Networks – Home Communications, which includes Internet Telephony and Home Telephony – will become part of the Peripherals & Accessories unit within Philips’ Consumer Lifestyle sector.

By Niall Byrne