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Gemalto launches a raid on Wavecom

Thursday 9 October 2008

The combination is presented by Gemalto as an extension of its business in the growing Machine-to-Machine (M2M) market.

The offer prices each Wavecom share at EUR 7.00, which represents a 72% premium over the closing price of 3 October 2008. The offer prices each Oceane at EUR 20. The offer will be conditioned to the holding by Gemalto of shares representing at least 50.01% of the shares capital of Wavecom at the closing of the offer and of the US offer. Olivier Piou, Gemalto CEO, said that the bid was not hostile as Gemalto had been in talks with Wavecom for several months. The offer will be open only once the AMF declares the conformity of the offer.  The timetable of the offer will be determined by the AMF. Based on 15.8 million shares outstanding, Gemalto's proposed deal price values Wavecom at EUR 110.6 million.

Wavecom is a leader in the M2M industry with a service-oriented strategy and a set of unique competencies. Machine to machine communication is widely used across numerous market segments:

  • Automotive telematics: car security, location-based services, remote monitoring services
  • Utilities metering: automated data collection,
  • Tracking & fleet management: tracking of enterprise fleets or containers, and high-value cars or boats,
  • Industrial control: remote management of industrial equipment, home security , security alarm systems and other innovative smart-home devices,
  • Remote healthcare: remote monitoring of elderly or chronically ill for home treatment,
  • Vending & point-of-sale: remote management of vending machines, and wireless POS terminals in retail or taxis.

Wavecom's estimated revenue for 2008 is EUR 144 million, and the company's anticipated net income is EUR 1.5 million, with a net cash position of EUR 46 million. Wavecom has around 500 employees.

Machine to machine market is anticipated t experience a huge growth, as IDATE and ABI Research predict that by 2010 there will be more than 100 billion communicating objects, with close to 2 billion “intelligent machines”. This demand is to be fuelled by regulatory requirement such as a new regulation for emergency car safety such as the eCall initiative in Europe.

Wavecom management qualified Gemalto EUR 110 million takeover bid as "hostile" and "financially inadequate" but said the board would review it. The management of Wavecom emphasized that this offer was neither encouraged, endorsed nor discussed with Wavecom and therefore considers the offer hostile. In addition, the management of Wavecom believes that the price offered does not reflect the intrinsic value and prospects of the Company.

On Monday, Wavecom shares leaped 61% to 6.55 euros, on Tuesday, Wavecom shares reached EUR 8.48, far beyond Gemalto's offer. Also on Tuesday, Gemalto shares closed at EUR 22.91, a 11.8% fall since Friday.