Pace and Arris Group are said to be favorites to acquire Motorola Home from Google

The British set-top box company Pace has announced that it has made an early-stage proposal to Google to acquire its Motorola Home business, according to a report from Reuters.

Way back in March we noted that before Google even officially closed its $12.5bn Motorola Mobility acquisition, rumours had spread that the Big G was looking to offload the set-top box part of the business. The purchase gave Google a 17,000 patent bounty.

In August, Bloomberg reported that Google had brought in Barclays to find a suitable buyer. Back then the value was estimated to be at about $2 billion.

Today Bloomberg pointed out that Arris Group and Pace have made the better offers so far but that the official announcement may be delayed due to Google’s complex financing system and the possibility that it may retain some patents. To further complicate the deal, things may be slowed further as Tivo is suing Motorola for patent infringement.

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In a statement [PDF], Pace said that discussion with Google were at the preliminary stage and there was no guarantee there would be an agreement.

Pace also said that its shares have been suspended from trading in London as “the potential acquisition of Google’s Motorola Home business would be classified as a “reverse takeover” under the UK Listing Rules given its size relative to Pace.”

Since acquiring Motorola, Google planned to reshape it by slashing 20% of the work force and ‘closing or consolidating’ around a third of its global facilities. Already many sites are being closed down including Asia, Europe, Middle East & Africa, Hong Kong, and Taiwan.

These are slippery times for set-top boxes. Many services are already integrated into TVs and of course the existing Google TV service is gathering new features while Apple TV while Apple TV sold more than 1.3 million units in the company’s 2012 Q4 alone. Whoever takes on whatever is left of Motorola Home after Google is done picking at the bones, maybe have to be creative with the leftovers.