Semtech is acquiring Canadian IoT provider Sierra Wireless for $1.2 billion. Through the merging of LoRa and cellular, two major IoT technologies, the industrial world may now be digitally transformed with a robust chip-to-cloud platform.
Semtech expects that by combining Sierra Wireless’ cellular capabilities throughout its modules, gateways, and managed connectivity with Semtech’s LoRa-enabled end nodes, a new IoT portfolio will be created, enabling a wide range of IoT use cases.
Also, the combination of Semtech’s LoRa cloud services and Sierra Wireless’ cloud service offerings need to result in a future cloud service portfolio with improved security, provisioning, device management, and geolocation capabilities for IoT applications that are power-optimized. This new cloud service capability is expected to immediately add more than $100 million in high-margin, recurring IoT cloud service revenues.
The acquisition is estimated to significantly increase the addressable market for California-based Semtech, almost treble Semtech’s yearly revenue, and produce a robust and varied portfolio of connectivity for the expanding IoT market.
“We believe the next era of technology growth is the full digitisation of our industrial world,” said Semtech chief executive officer Mohan Maheswaran. “Our vision is to build a simple, horizontal platform with the goal of accelerating this transformation and to bring about a smarter and more sustainable planet. This exciting strategic acquisition of Sierra Wireless is a critical part of bringing this vision to life through the combination of cellular, LoRa and cloud services. Together, with the world-class Sierra Wireless engineering team, we will be positioned to advance the market with multi-radio solutions that bring new chip-to-cloud services to support customers and grow our business.”
Modules, gateways, 5G, and cloud services are some of the assets and skills that Sierra Wireless contributes to Semtech. Semtech predicts that the combined company will be well-positioned to serve high-growth markets like supply chain, logistics, and asset management; utilities, including water, gas, and electric metering; smart cities and buildings, including air quality monitoring and public safety; smart agriculture; and species protection.
This is due to Sierra Wireless’ expertise in IoT and cellular engineering, software, and services as well as its knowledge of IoT channels and vertical markets.
“Over the last year, Sierra Wireless has taken decisive steps to profitably grow the business, and I am proud that the progress we have made has culminated in this exciting transaction,” said Phil Brace, chief executive officer of Sierra Wireless. “Together with Semtech, we will be able to extend the reach of IoT by scaling, optimising and ultimately delivering an even stronger product portfolio and service model to customers. Sierra Wireless is a high growth business with some of the best, most advanced IoT technology in the industry, and we are pleased to deliver immediate and compelling value to our shareholders through this transaction. Joining Semtech will also allow us to bring cellular and LoRa technology together to create innovations that exceed the expectations of our customers around the world while delivering exciting career opportunities to our talented employees as part of the combined company.”
Subject to customary closing requirements, Semtech will purchase all of the existing shares of Sierra Wireless for $31 per share in an all-cash transaction with an estimated enterprise value of $1.2 billion. Additionally, the purchase is projected to generate $40 million in run-rate operational synergies within 12 to 18 months following the transaction’s completion and to be immediately accretive to Semtech’s non-GAAP EPS before synergies.
Semtech plans to use cash on hand and committed loan financing set up by JP Morgan to finance the purchase. The boards of directors of Semtech and Sierra Wireless have authorized the acquisition, but other usual closing conditions must also be completed, including the approval of Sierra Wireless shareholders, certain regulatory agencies, and the Supreme Court of British Columbia.
The closing of this acquisition is expected for the 2023 fiscal year of Semtech. The parties are separate, independent companies until the transaction is completed.