Renesas Electronics has terminated its proposed $249 million purchase of France-based cellular IoT module maker Sequans Communications. It said the decision was down to an “adverse Japanese tax ruling”, apparently about the fee it would be required to pay on “taxable gain” after integration of the Sequans business following its purchase. The memorandum of understanding (MoU) between the pair, and the tender offer, have been cancelled as a consequence, it said.
A statement said: “Under the terms of the MOU, either Renesas or Sequans can terminate the MOU if, among other reasons, Renesas receives a confirmation from the Tokyo Regional Taxation Bureau that consummation of the reorganisation provided in the MOU would require Renesas to recognize taxable gain and pay such tax… On February 15, 2024, Renesas received an Adverse Japanese Tax Ruling. As a result, Renesas exercised its right to terminate the MOU… [and] tender offer.”
The deal, agreed last August, had been expected to close this quarter, subject to approval by the French firm’s works council, and by local tax and regulatory authorities. The $249 million valuation has covered all stock held by all its shareholders, including US-based equity shares; it included net debt. The offer valued Sequans 42.3 percent higher than its closing price at the time of the deal, and 32.6 per cent and 7.7 percent higher than its weighted average price over the previous six months and 12 months, respectively.
A counter statement from Sequans implied it was business-as-usual for Sequans, and that it had alternative options available to it. It said: “Throughout the tender offer process, the company has continued to develop its business and is confident in its ability to manage the situation and continue its business as an independent company. As a result of strong customer relationships and the unique capabilities of its technology, Sequans is optimistic about its ability to grow its market share and expand its future revenue streams.”
It added: “In addition, the Board is pleased to have multiple strategic options to consider and is working with management to pursue each of these opportunities.”
Georges Karam, chief executive at Sequans, commented: “Our revenue pipeline continued to grow during the tender process. Many ‘massive IoT’ design wins are shipping and product revenues are ramping compared to 2023. We continue to enjoy a strong position in key sectors such as metering, fleet management and asset tracking. Furthermore, our 5G product is currently in the sampling phase, allowing us to capitalise on the distinct strategic value of this intellectual property. This is opening up new strategic opportunities similar to those successfully pursued in the past.
“We will update our business outlook and provide an overview of the strategic opportunities we are actively pursuing during our forthcoming fourth-quarter and full-year 2023 earnings call. We are confident about the growth perspectives in our business and about our ability to address financial challenges in order to put the company in a healthy position.”
Sequans, founded in 2003, specialises in cellular-based low-power wide-area network (LPWAN) solutions, notably running NB-IoT and LTE-M, as well as higher-powered LTE-4G and 5G based IoT hardware.
Renesas has been on a buying spree, which has also seen it snap up UK-based power management and industrial IoT specialist Dialog (August 2021), Israeli enterprise Wi-Fi chipset and software provider Celeno (December 2021), and Austrian near-field comms (NFC) chip maker Panthronics (June 2023).
