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Pace Makes $310 Million Play for Aurora Networks

U.K.-based set-top maker Pace plc is expanding into the network access technology business after making a $310 million offer for Aurora Networks, a developer and supplier of optical transport and access network gear for cable operators and other service providers.

Pace has also agreed to pay another $13 million “on closing in connection with tax benefits to be recovered over the three years post acquisition.”

Pace is funding the cash deal through a new $310 million, five-year amortizing term loan, and is using the purchase as an opportunity to refinance its existing debt facilities with a new $150 million, five-year revolving credit facility.  

Following the closure of the deal, Aurora will continue to be run by its existing senior management team, including Aurora CEO Guy Sucharczuk, and operate as a strategic business unit of Pace. Additoinally, Pace has agreed to implement a three year, performance-based incentive plan for Aurora’s key management team.

Aurora will also retain its brand and manage a separate P&L “to retain focus and accountability for business performance.”

Pace, which announced the deal early Wednesday morning, said Aurora generated revenues of $217 million and EBITDA of $30 million for the fiscal year ended March 31, 2013. Privately held Aurora has more than 200 customers in 50 countries, including the top ten cable MSOs in the U.S., and delivered 30 straight quarters of profits, according to Pace.

Aurora Networks, founded in 1999 and based in Santa Clara, Calif., specializes in optical transport gear for MSOs, including Radio Frequency Over Glass (RFoG) equipment. Among new products is an “upgradable” node that enables North American cable operators to more than double the capacity of their return path.

Pace said the deal will help it to establish deeper relationships with key customers, enable it to cross-sell across customer footprints, and allow the company to continue its expansion beyond customer premises equipment to the pay-TV industry.

Pace said the buy will be accretive to earnings in 2014 while accelerating the company toward an “improved target of 9% Return on Sales in 2015.”

“The acquisition of Aurora represents an important  evolution in this process and enhances our strategy to grow a broader platform across Hardware , Software and Service,” said Pace chairman Allan Leighton, in a release. “Acquiring Aurora will allow Pace to expand beyond our core business and build  deeper and more embedded relationships with our customers, which the Company believes will strengthen Pace’s position as a market leading solutions provider for the PayTV and broadband industries.”

“Aurora is a leading player in the pivotal area of Optical Transport and Access Network solutions, with a complementary overlap to Pace’s blue-chip customer base and a strong and seasoned team of talented and innovative cable industry professionals,” added Pace CEO Mike Pulli.

“Joining with Pace will create a market leading PayTV and  broadband solution portfolio and a leading solutions provider to operators globally,” said  Aurora’s Sucharczuk. “The management team and I are excited to be joining and believe the combined organisation will go from strength to strength.”

Pace planned to discuss the deal in further detail during a conference call set for Wednesday at 7 a.m. ET.