Set top box maker Pace has been a strong performer this year after overcoming supply shortages following floods in Thailand.
And now it could be in line to buy Motorola's set top box business, put up for sale by owner Google. According to the Wall Street Journal, bids are due in by Friday (although the deadline could be extended) with interested parties said to include Pace, Technicolor, Arris and private equity firms.
There was also a suggestion Google could help finance the deal, since the Motorola business is expected to be worth between $1.5bn and $2.5bn. Analysts at Espirito Santo said:
There is strong rationale for combining Pace and Motorola's set-top box business unit as it could generate significant cost synergies. It would create an undisputed leader in the set-top box market with a 25% market share with more than 10% market share for the next biggest competitor (i.e Technicolor). Furthermore, we believe that the Motorola set top box unit generates close to double digit EBITA margins (Pace's 2013 estimated EBITA margin is 8.0%) as software accounts for a higher proportion of its revenues.
However, the scale of the acquisition and Pace's balance sheet underpinned our historical skepticism on the prospects of a potential deal. In this light, it is interesting to note WSJ's comments that Google could potentially help finance a deal.
Pace, the star performer so far in our share tips for 2012, is up 2.2p at 191.7p.
