Semtech is acquiring Canadian IoT provider Sierra Wireless for $1.2 billion.

This brings together two important IoT technologiesLoRa and cellularto enable the digitisation of the industrial world with a comprehensive chip-to-cloud platform.

Semtech expects the combination of Sierra Wireless’ cellular capabilities across its modules, gateways and managed connectivity with Semtech’s LoRa-enabled end nodes to create a differentiated IoT portfolio that will enable a plethora of IoT use cases.

In addition, the combination of Sierra Wireless’ cloud services offerings and Semtech’s LoRa cloud services should bring together a future cloud services portfolio that will include enhanced security, provisioning, device management and geolocation capabilities for power optimised IoT applications. This new cloud services capability is expected to add more than $100m of high-margin IoT cloud services recurring revenues immediately.

The acquisition should expand California-based Semtech’s addressable market significantly and is expected to approximately double Semtech’s annual revenue and create a strong and diverse portfolio of connectivity for the growing 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.”

Sierra Wireless brings complementary skills and capabilities to Semtech, including modules, gateways, 5G and cloud services. Given Sierra Wireless’ expertise in IoT and cellular engineering, software and services and its knowledge of IoT channels and vertical markets, Semtech expects the combined company will be well positioned to serve high growth segments such as supply chain, logistics and asset management; utilities, including water, gas and electric metering; smart cities and buildings, including air quality monitoring and public safety; and smart agriculture and species protection.

“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.”

Semtech will acquire all outstanding shares of Sierra Wireless for $31 per share in an all-cash transaction representing a total enterprise value of approximately $1.2 billion, subject to customary closing conditions. The deal is also expected to be immediately accretive to Semtech’s non-GAAP EPS before synergies and generate $40 million of run-rate operational synergies within 12 to 18 months post-transaction close.

Semtech intends to fund the transaction with cash on hand and committed debt financing arranged by JP Morgan. This transaction has been approved by the Semtech and Sierra Wireless boards of directors, and is subject to approval by Sierra Wireless shareholders, certain regulatory bodies and the Supreme Court of British Columbia, and other customary closing conditions. This transaction is expected to close in Semtech’s fiscal year 2023. Until close, the parties remain separate independent companies.