Renesas to acquire IoT company Sequans through tender offer

Renesas Electronics Corporation, a supplier of advanced semiconductor solutions, and Sequans Communications, a 5G/4G cellular IoT chips and modules provider, have announced that the two companies have entered into a memorandum of understanding (the "MoU"). 

According to the terms of the MoU, Renesas will, following consultation of the Sequans' works council and favourable recommendation by the Sequans Board, commence a tender offer to acquire all outstanding ordinary shares, including American Depositary Shares (ADS) of Sequans for US$3.03 per ADS (each ADS representing four ordinary shares) in cash. 

The transaction values Sequans at approximately US$249 million, including net debt. It is expected to close by the first quarter of calendar year 2024, subject to confirmation of tax treatment from relevant authorities, regulatory approvals and other customary closing conditions.

Upon closing the transaction, Renesas intends to integrate Sequans' breadth of cellular connectivity products and IP into its core product line-up, including microcontrollers, microprocessors, analogue and mixed-signal front ends. 

The acquisition will allow Renesas to immediately expand its reach to the Wide Area Network (WAN) market space encompassing a broad range of data rates. It will also enhance Renesas' portfolio of Personal Area Network (PAN) and Local Area Network (LAN) connectivity products.

The market for cellular IoT technology provided by companies like Sequans is growing rapidly, fuelled by demand for smart meters, asset tracking systems, smart homes, smart cities, connected vehicles, fixed wireless access networks, and mobile computing devices. An industry study forecasts that the number of cellular IoT devices will grow by more than 10% annually.

"We are thrilled to take our partnership with Sequans to the next level," says Hidetoshi Shibata, president and chief executive officer of Renesas. "Sequans is a leader in the fast-growing cellular IoT market with wide cellular IoT network coverage. The company's technology gives Renesas a path to offer broad connectivity capabilities across IoT applications to address the evolving customer needs."

"We have been working closely with Renesas to serve the growing market demand for massive IoT and broadband IoT customers," adds Georges Karam, chairman and chief executive officer of Sequans. "As many telecom operators around the world continue to invest in 5G infrastructure and with the expanding deployment of IoT applications, combining with Renesas opens up vast opportunities to usher in a new era of seamless connectivity and digital mobility that can transform a multitude of industries."

The acquisition of Sequans is the latest effort by Renesas to expand its offering of connectivity products through strategic acquisitions, including the purchases of Dialog, Celeno and, most recently, Panthronics. 

Renesas and Sequans have been collaborating since 2020 to deliver full-scale solutions that combine Renesas' embedded processors and analogue front-end products with Sequans' wireless chipsets for massive IoT and broadband IoT applications.

"Founded in 2003, Sequans is a fabless semiconductor company that designs and develops chipsets and modules for Internet of Things (IoT) devices. Offering products with extensive 5G/4G cellular categories, including 5G NR, Cat 4, Cat 1 and LTE-M/NB-IoT, Sequans provides reliable IoT wireless connectivity without the need for a gateway," informs Karam.  

"We have proven expertise in low-power wireless devices, which is crucial in supporting massive IoT applications operating at low data rates. Our certified solutions are designed to work with all major radio frequency regulatory specifications by leading carriers in North America, Asia-Pacific and Europe."

The two companies also shared the details of the transaction, as below.

Under the terms of the MoU, Renesas will initiate a cash tender offer of US$3.03 per Sequans ADS, subject to certain conditions. This offer represents a premium of 42.3% to Sequans' closing price on August 4, and 7.7% premium to the volume-weighted average price over the last twelve months and a 32.6% premium to the volume-weighted average price over the previous six months. The transaction values Sequans at approximately US$249 million, including net debt of about US$52 million.

If, upon completion of the appropriate works council consultation, Sequans' Board recommends the tender offer to the holders of Sequans' ordinary shares and ADSs, Renesas will commence the tender offer afterwards. The transaction's closing is subject to the valid tender of Sequans shares representing at least 90% of the outstanding share capital of Sequans on a fully diluted basis, including Sequans shares owned by Renesas. The transaction is also subject to confirmation of tax treatment from relevant authorities and receipt of required regulatory approvals and other customary closing conditions.

In addition, upon Sequans Board recommendation and appropriate works council consultation on the transactions described below, Sequans will convene an ordinary and extraordinary general meeting of the shareholders to vote on a series of transactions that would result in Sequans structurally, but not operationally, re-domiciling in Germany. 

Following the closing of the tender offer and completion of such transactions, any ordinary shares or ADSs not tendered would be transferred to Renesas under German squeeze-out rules for statutory compensation. In connection with these transactions, Sequans' existing French activities, including assets, liabilities and employees, would be first transferred to a new wholly-owned French subsidiary of Sequans.

The tender offer is expected to close by the first quarter of 2024, and the re-domiciling and related transactions are expected to close by the fourth quarter of 2024. Assuming the completion of the tender offer, Sequans will become a privately held company, and Sequans' ADSs will no longer be listed on any public market.

The tender offer will be implemented following the terms and conditions of the MoU. In addition to the terms of the tender offer, the MoU contains customary representations, warranties and undertakings by Sequans and Renesas.