Last checked at LONDON (Alliance News) - Shares in set-top TV box maker Pace have risen by a third Thursday after it agreed to be acquired by US broadband network equipment maker Arris Group Inc for GBP1.4 billion in cash and shares, the latest so-called inversion deal that will see Arris domicile in the UK to take advantage of lower taxes.
Under the terms of the deal, shareholders of the FTSE 250-listed company will receive GBP1.325 in cash and 0.1455 of a Arris share for each Pace share, making a total consideration of GBP4.265 per share, a 28% premium to Pace's closing price on Tuesday. Pace's shares are up 35% at 449.50 pence Thursday.
Pace shareholders will get approximately 48.2 million shares in the New Arris business and will hold a 24% stake, with Arris holding the remaining 76%. Bob Stanzione, the chairman and chief executive of Arris Group, will become the chairman and chief executive of the combined entity.
The deal means New Arris, which will still be headquartered in the US but domiciled in the UK, will have a corporate tax rate of about 20% compared with about 35% in the US.
"Adding Pace's talent, products and diverse customer base will provide ARRIS with a large scale entry into the satellite segment, broaden our portfolio and expand our global presence. We expect this merger will enable ARRIS to increase its speed of innovation," said Stanzione.
Pace showed its value Thursday, saying in a trading update that profit rose in the first quarter 2015, buoyed by higher revenue and gross margins and lower costs, and demand from all of its markets and product segments is building. It continues to expect revenue to be stronger in its second half than in the first half.
Pace has grown into a UK technology global success story, providing its boxes to the likes of AT&T, Comcast and DirecTV in the US, Liberty Global, Sky Deutschland and Canal+ in Europe, as well as big payTV operators in Latin America and the rest of the world.
However, analysts have expressed concern about Pace's future, as TV viewers start increasingly switching to online streaming of programmes and films rather than watching via set-top boxes.
"Pace's core consumer premise equipment business faces an uncertain outlook around the longevity of set-top boxes and more intelligence going to the cloud, reducing in-home capex. This offer crystallizes value for Pace shareholders," said Liberum analyst Eoin Lambe.
"While we believe that Pace is strongly positioned to continue to execute its strategy in the medium and long term, we believe that the combination of the complementary ARRIS and Pace businesses will create a platform for future growth above and beyond our standalone potential," Pace Chairman Allan Leighton said.
Oil major BP has agreed to sell its equity in the Central Area Transmission System gas pipeline in the UK North Sea to Antin Infrastructure Partners for GBP324 million. BP currently operates the pipeline and processing facility, but said it decided to sell the asset in the wake of the Wood review into the North Sea oil and gas industry that was commissioned by the UK government.
Ian Wood had suggested that infrastructure should be owned by companies which are solely focused on operating pipelines and other infrastructure rather than oil and gas producers such as BP, or be owned collaboratively by several operators so more have access to the infrastructure.
"CATS has been a great business for BP but, aligned to the recommendations of the Wood review, we believe securing this new owner will ensure a better long-term future for this key piece of North Sea infrastructure," said Trevor Garlick, BP's regional president for the North Sea.
However, the move also comes as BP cuts its spending in the North Sea in response to the recent sharp decline in oil prices.
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Markets: UK stock indices have had a mixed morning, with the FTSE 100 recovering from losses that followed flash Purchasing Managers' Index readings from Europe missing expectations. The pound is down against the dollar following data showing an unexpected decline in UK retail sales in March.
US stock futures point to a lower open on Wall Street. The DJIA and the S&P 500 are currently set to open down 0.3% and the Nasdaq 100 down 0.2%.
FTSE 100: flat at 7,026.94
FTSE 250: down 0.2% at 17,604.54
AIM ALL-SHARE: down 0.1% at 748.86
GBP: down at USD1.5004
EUR: up at USD1.0740
GOLD: flat at USD1,189.53 an ounce
OIL (Brent): down at USD62.65 a barrel
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Other Top Corporate News
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WPP maintained its guidance for the full year as the stronger dollar helped boost revenues in its first quarter, although growth slowed after January, and it highlighted continued caution amongst its clients. WPP said its revenue rose 8.3% in sterling in the quarter, boosted by the weakness of sterling against the US dollar although this was partly offset by the strength of sterling against the euro, and at constant currency revenue growth was 7.4%. On a like-for-like basis, meaning at constant exchange rates and excluding acquisitions and disposals, revenue was up 5.2%.
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Anglo American reported a rise in iron ore, platinum and diamond production in the first quarter and reiterated its full-year guidance across all of its segments bar diamonds, despite copper and nickel production falling and coal giving mixed results. The miner said iron ore production rose at both the Kumba and Minas-Rio mines, with thermal coal, diamond and platinum production also rising, whilst metallurgical coal, copper and nickel production fell year-on-year in the first quarter. Anglo American said all of its unit guidance remains unchanged for the full year apart from diamond production, which has been reduced to between 30 million to 32 million carats compared with its original guidance of 32 million to 34 million carats.
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Housebuilder Taylor Wimpey signaled further profit growth saying private reservation rates and average selling prices are continuing to rise, and uncertainty about the outcome of the UK election was failing to dent consumer confidence. In a trading update, the company said it has achieved an average private net reservation rate of 0.76 sales per outlet per week so far in 2015, up from 0.74 sales per outlet in the same period in 2014. Average selling prices of homes in its private order book are up 14% on the year to about GBP282,900, from GBP249,100. It is currently operating from 302 outlets, the same number as a year ago. It said its total order book also remains strong at 8,200 homes, compared with 8,231 homes at the same stage in 2014.
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Hammerson said it has completed the sale of Drakehouse Retail Park in Sheffield to 90 North Real Estate Partners LLP for GBP61.7 million, ahead of the property's book value at the end of 2014 and representing a net initial yield of 6.4%.
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Meggitt reiterated it expects its organic revenue to rise by low-to-mid-single digits in 2015, after organic revenue grew 4% in the first quarter, and it's also still expecting to get a revenue boost from the rise in the dollar against sterling as well as from its acquisition of Precision Engine Controls. In a trading update ahead of the company's annual general meeting, the aerospace engineer said some of the boost from the stronger dollar will be offset by the weakening of the euro against the pound.
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In the same sector, technology components and systems manufacturer Senior said trading in the year to date has been broadly in line with its expectations and said its full-year profit estimates are on track as some short-term challenges were offset by beneficial foreign exchange movements. The company said its Aerospace division was boosted by healthy demand in the large commercial aircraft sector in the year to date, with Boeing and Airbus having delivered a combined 318 aircraft in the first quarter, up 5% year-on-year.
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Meanwhile, aerospace and defence manufacturer Cobham maintained its full-year guidance, saying that the integration of US communications equipment maker Aeroflex is on track and adding that it anticipates a greater weighting of its earnings to the second half. Cobham said its trading in 2015 started slowly, with a pick-up seen in March, and added there has been a net modest adverse impact on its earnings from currency translation in the first quarter.
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William Hill reported a drop in operating profit in the first quarter of 2015 during what the company said has been a slow start to the year, following its largest-ever loss-making week in sports betting in January. The bookmaker reported a 19% decline in operating profit to GBP16 million in the quarter ended March 31, which it said was hit by a GBP20 million cost from the point of consumption tax and an increased rate of Machines Games Duty. William Hill also said that sports betting revenue was hit by its largest ever loss-making week in January. It said punter-friendly results in the third week of the 2015 led to a GBP14 million loss.
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Computacenter said that 2015 should be "a year of progress", as it posted a decline in revenue of 2% in the first quarter mostly due to continued declines in its French business. Revenue fell to GBP715.9 million in the first quarter of 2015 from GBP733.7 million a year before, although at constant currency it rose 3%. Whilst the company saw strong growth in the UK and good performance in Germany, revenue continued to decline in France.
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Specialty chemicals company Bodycote reported a mixed revenue performance in the first quarter, with its aerospace, defence and energy business trading well but some drag caused by its automotive and general industrial division. Bodycote said group revenue in the three months to the end of March was GBP151.6 million, down 0.9%. It said revenue was up 1.9% at constant currencies.
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Acacia Mining said an increase in production in the first quarter of 2015 was offset by weaker gold prices and higher costs, which kept revenue flat and caused its pretax profit to fall. The FTSE 250 miner based in Africa said revenue in the first quarter ended March 31 remained fairly flat from a year earlier at USD215 million as an increase in production was offset by gold prices falling by 7%. Profit before tax fell in the quarter to USD17.4 million from USD31.3 million a year earlier as its cost of sales increased, alongside administrative and finance expenses rising.
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AIM Movers
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Trakm8 Holdings shares have risen by over a fifth after it said revenue in the recently-ended financial year nearly doubled and annualised recurring revenue also surged higher, and it also expects its results for the current financial year to be ahead of its expectations. Urals Energy Public Co is also doing well after it released a statement prior to its extraordinary general meeting claiming the company is currently undervalued. It believes it warrants a higher value after resolving litigation issues in Russia earlier this month. Urals is debt free, and said it continues to consider a number of potential acquisition opportunities. Xeros Technology Group is also up after it signed up 61 new forward channel partners at its Clean Show 2015 event in Atlanta, part of its effort to build a sales and bead servicing network across the US. Trap Oil Group is down sharply after it said it risks becoming insolvent if it does not secure further funding, as its sole producing asset is currently loss-making and eating away at the company's cash balance. Its revenue plummeted in 2014 and its loss substantially widened due to numerous problems with the Athena field throughout the year.
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Other Top Economics And General
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UK retail sales declined unexpectedly in March due to a fall in non-food store sales, data from the Office for National Statistics showed. Retail sales including auto fuel dropped 0.5% on a monthly basis in March, reversing a 0.6% rise in February. This was the first fall in six months. Economists had forecast a 0.4% rise for March.
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Another report from the ONS showed that UK public sector net borrowing excluding interventions decreased by GBP0.4 billion from last year to GBP7.4 billion in March. The expected level was GBP7.0 billion. In the financial year ended 2015, PSNB totalled GBP87.3 billion, a decrease of GBP11.1 billion compared with the same period in the financial year ended 2014.
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Eurozone private sector growth pulled back from March's 11-month high in April, flash survey data from Markit Economics showed. The composite output index fell unexpectedly to 53.5 in April from 54 in March. The expected score was 54.4. At the same time, Germany's private sector growth moderated. The flash composite output index fell to 54.2 in April from an eight-month high of 55.4 in March. The latest index reading was still the second-strongest since last September.
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China's factory activity moved further into negative zone in April, logging the weakest operating conditions in a year, flash estimate released by Markit Economics showed. The HSBC manufacturing Purchasing Managers' Index fell to 49.2 in April, a 12-month low, from 49.6 in March. It was expected to remain at 49.6. A score below 50 indicates contraction in the sector.
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The manufacturing sector in Japan slid to contraction in April, the latest survey from Markit Economics revealed, with a PMI score of 49.7. That missed forecasts for 50.8 and it's down from 50.3 in March.
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The leaders of the EU were due to meet in Brussels to tackle an escalating migration crisis and the daily arrival of hundreds of would-be asylum seekers crossing the Mediterranean. The one-day talks in Brussels were hastily convened following a tragic shipwreck off the coast of Libya at the weekend. Only 24 bodies have been recovered of the more than 800 thought to have perished, according to the UN agency for refugees, UNHCR. According to draft summit papers seen by dpa, leaders are set to consider "at least doubling" the funds for Mediterranean sea patrols and plans for a possible military mission targeting boats used by smugglers.
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Labour and the Tories are set to trade blows on the economy on Thursday in the latest round of campaigning, as a think tank raised further concerns about the impact of the Scottish National Party's tax plans and UKIP leader Nigel Farage gave further clarity on his party's immigration policies in a BBC interview. Labour and the Tories are set to put the economy at the centre of their campaign swipes on Thursday, with Labour leader Ed Miliband to accuse the Tories of planning the biggest cuts anywhere in the developed world and Tory Chancellor George Osborne to once more warn of the "chaos" that would accompany a Labour government propped up by the SNP.
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Labour swung back into the lead in the daily YouGov poll, having lost the lead to the Conservatives the day before, as various polls of polls have the two parties broadly level-pegging a fortnight before the UK General Election. The daily YouGov/The Sun poll has Labour in the lead on 34%, with the Tories losing two points to 33%. UKIP, whose leader Nigel Farage was the subject of a one-on-one interview on the BBC on Wednesday evening, gained a point to 13%, while the Liberal Democrats were flat at 7%. The Financial Times seat projections estimates, provided by Election Forecast, have the Tories still slightly in the lead with 283 projected wins to Labour's 271.
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The US accused Russia of building up its forces along its border with Ukraine. The additional units being sent will give Russia its largest presence on the border since October 2014, State Department spokeswoman Marie Harf said in a statement. In addition pro-Russian separatists continue to violate the terms of the Minsk agreement signed in February, Harf said.
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The UN Office for the Coordination of Humanitarian Affairs said the halting of air strikes by the Saudi Arabia-led coalition has sparked violence in the city of Aden, with ground fighting involving tanks erupting throughout the city and militants are entering residential areas. OCHA said after the announcement of a halt in the month-long campaign of aerial strike by a coalition led by Saudi Arabia, most people in the Yemeni capital, Sana'a, are staying indoors and adopting a "wait-and-see" attitude.
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Afternoon Watchlist (all times in BST)
13:30 US Jobless Claims
14:45 US Markit Manufacturing PMI Preliminary
15:00 US New Home Sales
15:30 US EIA Natural Gas Storage change
16:00 US Kansas Fed manufacturing activity
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Friday's UK Corporate Events
Aviva - Q1 Interim Management Statement
AstraZeneca - Q1 Results
Pearson - Q1 Interim Management Statement
Record - Trading Statement
Phoenix Group Holdings - Q1 Interim Management Statement
Rotork - Interim Management Statement
Spectris - Tradung Statement
Reckitt Benckiser - Q1 Trading Statement
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Friday's Key Economic Events (all times in BST)
All Day EU Eurogroup meeting
n/a Germany Import Price Index
09:00 Germany IFO - Current Assessment
13:30 US Durable Goods Orders
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21 Nov 2016 16:03
