Sierra Wireless Inc. (SWIR: Quote,SW.TO: Quote) announced Monday that it has executed a definitive agreement for the sale of substantially all of the assets and operations related to its AirCard business to Netgear Inc. (NTGR: Quote) for $138 million in cash plus approximately $6.5 million in assumed liabilities as of December 31, 2012.
Sierra Wireless expects to realize net cash proceeds of approximately $100 million from the asset sale, after related taxes, expenses, and funds held in escrow. The transaction is expected to close in March 2013, subject to customary closing conditions.
Under the transaction, Netgear will acquire the assets and operations of the AirCard business, including customer relationships, products, intellectual property, inventory, and fixed assets, and assume certain liabilities, including warranty commitments and other customer obligations. Approximately 160 employees, primarily in sales, marketing, and R&D, will be transferred to Netgear , as well as certain facilities in Carlsbad, CA and Richmond, BC.
Upon completion of the transaction, Sierra Wireless’s retained business will include its AirPrime embedded modules for M2M and Mobile Computing, AirLink intelligent gateways and routers, and AirVantage M2M cloud product lines.
Sierra Wireless intends to use net proceeds from the transaction to continue its acquisition strategy in the M2M market.
Sierra Wireless is also exploring alternatives to return a portion of the proceeds to shareholders and will seek approval of the Toronto Stock Exchange (“TSX”) to undertake a normal course issuer bid.
Sierra Wireless expects consolidated fourth quarter 2012 results to be solidly in line with prior guidance. Preliminary revenue for the full year is $644 million.
While announcing the third-quarter result, Sierra Wireless had expected net earnings of $5.6 million to $6.8 million or $0.18 to $0.22 per share, earnings from operations $7.5 million to $9.0 million and Revenue of $160.0 million to $165.0 million for the fourth-quarter. Analysts polled by Thomson Reuters expect the company to report earnings of $0.20 per share on revenues of $162.25 million for the fourth-quarter. Analysts’ estimates typically exclude special items.
With respect to the retained business, preliminary fourth quarter and full year 2012 revenues were $109 and $397 million, respectively, including $14.0 million and $61.1 million, respectively, in revenue from the sale of AirPrime embedded wireless modules to Mobile Computing customers.
Non-GAAP earnings from operations for the retained business were modestly positive in the fourth quarter, showing a steady improvement throughout the year.
Sierra Wireless said it will release fourth quarter and fiscal 2012 financial results after market close on February 6, 2013.
Netgear said it expect this acquisition to be accretive to non-GAAP earnings in the first full quarter that Netgear operates the AirCard business. The business Netgear are acquiring has a 12 month trailing net revenue run rate of approximately $247 million through December 2012.
Netgear currently expect to achieve net revenue of $305 million to $310 million and non-GAAP operating margin within the 11% to 11.5% range, both of which are within the guidance it provided last quarter for net revenue and non-GAAP operating margin, respectively.
While announcing the third-quarter, Netgear expected net revenue in the range of about $300 million to $315 million for the fourth quarter of 2012. Analysts expect the company to report revenues of $308.06 million for the fourth-quarter.
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by RTT Staff Writer
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