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Summary:

Pace is expanding its reach with the acquisition of broadband video technology firm 2Wire for $475 million in cash. The purchase will give it access to more U.S.-based IPTV providers like AT&T, while also helping to round out its ability to provide IP-based video services.

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UPDATE U.K. set-top box maker Pace plc is expanding its reach in the U.S. and into the online video market with the acquisition of broadband video technology firm 2Wire. The purchase, for which Pace is paying $475 million in cash, will give it access to IPTV providers like AT&T and will help round out its ability to provide IP-based video services.

2Wire makes residential home gateways and provides software and technology for IP-based video services over advanced set-top boxes. The company’s MediaPortal platform enables multiroom DVR, video placeshifting, media on demand and other home-media services, and is the technology behind AT&T’s Homezone service, which is available throughout its broadband footprint. 2Wire also makes broadband set-top boxes of its own, and provided the hardware for Blockbuster’s online video rental device.

That IP expertise will boost Pace’s technology capabilities with its own customers. Pace currently sells set-top boxes to cable providers such as BSkyB and Time Warner Cable.

2Wire is owned by a consortium of strategic and financial investors, including Alcatel-Lucent, AT&T, Telmex, Oak Investment Partners, Meritech Capital Partners and Technology Crossover Ventures. Through the acquisition, Pace says it will not only be the number one set-top box maker in the world, but that it will now also be the top residential gateway provider in the U.S. and the third largest globally. The acquisition is expected to close in the fourth quarter.

Update: Om points out that the Pace purchase comes about five years after AT&T and Alcatel-Lucent took over 2Wire in a deal that gave it a valuation of around $500 million, after Alcatel invested approximately $120 million in the firm. That means investors haven’t gotten much return from the company, especially since Venrock, Oak, TCV and Doll Capital had invested close to $190 million into 2wire over several rounds of financing prior to the Alcatel-Lucent deal.

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  1. Pace makes some of the DVRs for DirecTV.

    Any receiver or DVR ending in 700 was built by Pace.

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