Pace takes over Philips set-top box arm

Pace Micro has become the third-largest set-top box maker in the world after snapping up the set-top box arm of Philips, the Dutch consumer electronics giant, in a 68m deal.

The turnaround of Pace Micro over the past two years has been impressive as the former stock market darling returned to profit and successfully entered the US market. Yet taking over its larger loss-making rival, which ranks as a reverse takeover, is its boldest move to date as it continues to push for market share in a global market that is being driven by the rapid adoption of digital TV and high-definition channels.

Neil Gaydon, who is continuing as chief executive of Pace, said that the two companies have "zero overlap" in terms of customers, and that the combined entity will have greater buying power and wider geographic reach. The deal gives Pace a stronger position in South America and continental Europe, and provides the company with an IPTV product set. The takeover of the fifth largest player in the set-top box market by the number seven player will help the combined company to compete against the industry giants Thomson and Motorola.

Philips will take a 22.5 per cent stake in Pace and the UK company will have the right to use the Philips brand for at least three years.