After years of various merger and acquisition rumors (or hopes), ARRIS Group, Inc. (NASDAQ: ARRS) has finally entered into a big M&A deal. What is funny about this deal though is that it is not the type of merger that had been speculated upon many times over the last seventeen years or so. It now seems as though that time has finally caught up to the promises and hope that ARRIS investors of years past were waiting for.

ARRIS announced that it will acquire Pace PLC in a cash and stock deal valued at $2.1 billion. For a comparison, ARRIS was valued at $4.5 billion or so before the deal was announced — and is worth over $5.4 billion afterwards, in part because this is going to be a tax inversion.

ARRIS said that the acquisition will be accretive to its earnings per share within the first year following the acquisition. What matters so much here is the tax inversion.

Under the terms, Pace shareholders will receive 1.325 EURO in cash and a fixed exchange ratio of 0.1455 shares of the newly combined company for each Pace share — a 28% premium. ARRIS will use cash and debt to fund the deal, and it secured a fully committed facility from Bank of America Merrill Lynch to meet the funding requirements.

The formation of the New ARRIS will be incorporated in the United Kingdom, with its operational and worldwide headquarters staying in Suwanee, Georgia, in the U.S. The NewCo will remain listed as “ARRS” on the NASDAQ.

On the broad scope, Pace shareholders will receive about 48.2 million shares of the NewCo in aggregate. This gives current ARRIS shareholders about 76% of NewCo ARRIS, leaving 24% of the new ARRIS for existing Pace shareholders.

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Bob Stanzione, current Chairman and CEO of ARRIS, will take over the helm as both the Chairman and CEO of the combined company, New ARRIS. The quote on the buyout said:

This transaction is another example of ARRIS’s ongoing strategy of investing in the right opportunities to position our company for growth. 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. We believe this is a tremendous opportunity for ARRIS and our customers, employees, shareholders and partners around the world as we collaborate to invent the future. We look forward to working with the talented and accomplished team at Pace.

ARRIS has two groups. Its Customer Premises unit offers set-top boxes, gateways, digital subscriber lines, cable modems, adapters, and other modems. ARRIS’ Network & Cloud unit provides fiber coax equipment, routers, Wi-Fi, video management, storage, and distribution equipment.

Another consideration is that it was not even two weeks ago that ARRIS and Charter agreed to pay $135 million to acquire ActiveVideo. ARRIS will own 65% of the venture and will be the sales channel for its CloudTV platform. ActiveVideo’s global base of customers includes Cablevision, Liberty Global, Deutsche Telekom, Time Warner Cable, Roku, and others.

ARRIS has made other deals as well. It acquired C-COR, Digeo, Moxi, BigBand Networks, and a former General Instruments unit that became the home unit of Motorola Mobility. Stanzione of ARRIS said about the ActiveVideo acquisition earlier in April:

This joint venture signifies ARRIS’s continued investment in advanced software solutions that will create value across the entire video ecosystem. We look forward to the untold opportunities our extended partnership with Charter will spawn as we march together into the future. ARRIS and Charter are paving the way for an all IP network migration and enabling the software-defined TV experience that will deliver the unified, next-gen content experiences that today’s consumers demand.

ARRIS shares were once valued up in the $50’s back in the tech bubble from 1999 and 2000. It had traded at close to $10 for most of the time since the last giant technology bubble, up until the last year or so. Its multi-year high in the $30’s was late last year, before this deal was announced.

ARRIS shares were up 22.5% at $37.40 on last look after the Pace acquisition was announced. Imagine if the company knew years back that all it had to do was to go out and make a sizable acquisition overseas to get its stock rallying this much.

Keep in mind that the consensus analyst target is just over $34.50, and the highest analyst target of the nine analysts that are shown to cover ARRIS is $40. Still, ARRIS trades at less than 14 times expected 2015 earnings and less than 12 times expected 2016 earnings — and that valuation is after considering the gain of more than 20% in its shares.

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ARRIS was always one of those  companies that would greatly benefit from the expansion of video content to outside of the traditional cable and satellite dominance of the prior decades. Its growth opportunity ahead has exponential upside, if it executes and is not out-foxed by more dominant networking and communications equipment providers.

Other key issues from the past in ARRIS should be considered as well…

Just on March 10, Barclays raised its rating to Overweight with a $36 price target. In timing of analyst calls, maybe it is just as good to be luck as it is good.

Last year, Jefferies named ARRIS as a top franchise pick to buy, and they have the $40 price target. The firm said at that time:

Arris created digital TV, delivered the first wireless broadband gateway and is pioneering the standards and pathways for tomorrow’s personalized, Ultra HD, multiscreen and cloud services.

ARRIS has also been mentioned as a top supplier for Comcast and Verizon.

In the middle of 2014, RBC Capital Markets listed ARRIS as a top telecom and networking equipment stock to buy.

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