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Semtech-Sierra deal to add US$100 million of high-margin IoT Cloud services

IoT cloud

Global semiconductor supplier Semtech Corporation has acquired IoT solutions provider Sierra Wireless in an all-cash transaction of approximately US$1.2 billion in a definitive agreement.

“We believe the next era of technology growth is the full digitization of our industrial world – the Internet of Everything. 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,” said Semtech president and chief executive officer, Mohan Maheswaran. “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.”

“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. Together with Semtech, we will be able to extend the reach of IoT solutions by scaling, optimizing, and ultimately delivering an even stronger product portfolio and service model to customers,” said Phil Brace, president, and chief executive officer of Sierra Wireless. “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 innovative solutions 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.”

Over US$100 million of high-margin IoT Cloud services

The Sierra-Semtech deal will bring together two technologies– LoRa and cellular which are important for the future of IoT, thereby enabling the digitization of industries with a comprehensive chip-to-Cloud platform.

Sierra Wireless’ cellular capabilities across its modules, gateways, and managed connectivity combined with Semtech’s LoRa-enabled end nodes are expected to create a unique IoT portfolio that will give a spurt to a plethora of new IoT use cases. This combination will also bring together a future Cloud services portfolio offering with improved security, provisioning, device management, and geolocation capabilities for power-optimized IoT applications capable of immediately adding over US$100 million of high-margin IoT Cloud services recurring revenues.

Deal transaction details

Sierra Wireless shareholders will receive US$31 per common share, as per the agreement. This will represent a premium of about 25% to the closing price of Sierra Wireless’ common stock on July 29, 2022, and a premium of approximately 30% to Sierra Wireless’ unaffected 30-day volume weighted average price. Semtech is expecting to fund the transaction in cash and committed debt financing that is arranged by J.P. Morgan.

The Semtech and Sierra Wireless Boards of Directors have approved the transaction. However, the deal is subject to approval by Sierra Wireless shareholders, certain regulatory bodies, the Supreme Court of British Columbia, and other customary closing conditions.

Until the transaction closes in Semtech’s fiscal year 2023, the parties will remain as separate independent companies.

Read next: The number of connected IoT devices to reach 14.4 billion by end of 2022: reports IoT Analytics

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