Well, it didn’t take long; “advanced talks” between Semtech and Sierra Wireless, as reported yesterday, have quickly concluded, with US firm Semtech confirming a deal to acquire its Canadian counterpart for $1.2 billion. The deal, subject to final approval, will bring together Semtech’s LoRa/LoRaWAN property, enabling non-cellular low-power wide-area (LPWA) IoT in unlicensed spectrum, with Sierra Wireless’ well-established cellular-based IoT business.
Semtech said it will create a “comprehensive IoT platform” which brings together the “ultra-low power benefits of LoRa with higher bandwidth capabilities of cellular”. It is notable, probably, that the messaging draws a distinction between the LPWA capabilities of LoRa/LoRaWAN and cellular IoT (as “ultra-low” and “higher”, respectively), suggesting the preferred (and logical) multi-RAT combination of LoRa/LoRaWAN with LTE-M at hardware level.
The combined business will likely jettison NB-IoT as a future hybrid option with LoRa/LoRaWAN; at the same time, Sierra Wireless’ legacy NB-IoT portfolio will presumably be offered where IoT providers and customers prefer an ultra-narrowband cellular IoT option (and cellular coverage is available). Semtech said it will focus on hybrid RAT solutions that are “easy-to-use, interoperable… [and which] enable innovation and growth for IoT globally”.
A statement said: “This acquisition brings together two important technologies for the future of IoT – LoRa and cellular – to enable the digitization of the industrial world with a comprehensive chip-to-cloud platform. Semtech expects the combination of… cellular capabilities across its modules, gateways and managed connectivity together with… LoRa-enabled end-nodes to create a uniquely differentiated IoT portfolio.”
The proposed deal, to be approved by the Canadian firm’s shareholders, plus regulatory bodies, will double Semtech’s annual revenue, it reckons. The firm, which makes money also from licensing the LoRa-based tech to manufacturers and developers, posted revenue of $740.9 million in 2021/22, and $202.1 million in the first quarter of 2022/23. This includes recurring revenues for “high-margin” IoT cloud services of “greater than $100 million”.
This last integration is important. The combination of cloud services from both companies covers “enhanced security, provisioning, device management, and geolocation capabilities” for low-power IoT, said Semtech. The jump in revenue will come as Semtech’s addressable market expands with the inclusion of cellular IoT, and presumably the expansion of LoRa/LoRaWAN in line with broader IoT takeup, by “approximately 10-times” to $10 billion by 2027.
Semtech expects $40 million of operational synergies within 12-18 months of the deal closing, which is expected by the end of January, at the end of Semtech’s 2022/23 fiscal year. The addition of cellular IoT modules – going from NB-IoT and LTE-M at the low-power end to LTE and 5G at the high-performance end – will set Semtech to more broadly address IoT opportunities in supply chain / logistics, utilities, cities / buildings, and agriculture sectors, it said.
The deal proposes that Sierra Wireless shareholders receive $31 per share, as reported, at a premium of around 25 percent on the closing share price on July 29, when talks were confirmed, and 30 percent on its weighted average price. Semtech said it will fund the transaction with cash on hand and already-agreed debt financing.
Mohan Maheswaran, president and chief executive at Semtech, commented: “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… This acquisition… is a critical part of bringing this vision to life through the combination of cellular, LoRa, and cloud services. Together… 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.”
Phil Brace, president and chief executive officer at Sierra Wireless, said: “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… value to our shareholders through this transaction. Joining Semtech will also allow us to bring cellular and LoRa together to create innovative solutions that exceed the expectations of our customers.”
