Amsterdam, The Netherlands — Furthering its divestment of profit-challenged businesses, Royal Philips Electronics said this week it has completed the sale of its set-top boxes (STB) and connectivity solutions (CS) businesses, which were part of its home networks business unit within its consumer lifestyle sector, to U.K.-based technology provider Pace Micro Technology.

In the deal, Philips received 64.5 million Pace shares, representing a 21.6 percent stake in the company, which is valued at approximately $120 million. In addition, Philips will receive a total cash payment of almost $8 million in the coming three years.

The transaction will result in a gain of approximately $88 million, which will be recorded in the results of the Philips’ consumer lifestyle sector in the second quarter of 2008, Philips said.

Philips said the STB and CS businesses combined generated $665 million in revenue in 2007, and employ approximately 320 people, predominantly in France, who will transfer to Pace as part of the transaction.

Philips said in a statement that the transaction “combines the strengths of two leading players in the industry, creating one of the largest set-top-box players in the world at a time when the shift from analog to digital TV is rapidly increasing.”