Components and subsystems developer NeoPhotonics has agreed to sell its access and low-speed transceiver product lines to APAT Optoelectronics of Shenzhen, China, for approximately $26.4 million (€25.3 million) inclusive of payments under a transition services agreement.
The deal highlights NeoPhotonics’ increasing focus on advanced component designs for 100G speeds and beyond – products where it can enjoy better profit margins and greater market growth prospects (see, for example NeoPhotonics samples ClearLight CFP-DCO pluggable coherent module and NeoPhotonics targets 600G with 64G coherent receiver).
The assets to be sold include the intellectual property, inventory and fixed assets for NeoPhotonics’ passive optical networking (PON) product lines, including GPON and GEPON transceiver products at data rates up to 10G, as well as telecom, bidirectional and specialty optical modules at 10G speeds and below.
The transaction value of $26.4 million consists of an equivalent of $25.0 million purchase price plus an additional equivalent of $1.4 million to be paid as certain transition services are delivered. The transaction will be paid for with not less than the equivalent of $23.0 million in cash in China Renminbi, and not more than $2.0 million in a US dollar denominated promissory note.
In addition, APAT will assume outstanding supply chain purchase commitments and will be responsible for payment of VAT obligations. The purchase price is subject to adjustment after closing for inventory adjustments and by up to $10 million in the event of potential claims under transaction warranty commitments of NeoPhotonics.
Commenting on the transaction, Tim Jenks, NeoPhotonics chief executive officer, said: “This transaction underscores our objective to focus our efforts on growing high-speed optical networking products and solutions based on our advanced hybrid photonic integration technology platform to meet customer demand.”
For its part, APAT Optoelectronics is supplier of optical sub-assemblies for telecom and datacom market to major telecom equipment manufacturers in China, including Alcatel-Lucent Shanghai Bell, FiberHome and Huawei. The company also operates an R&D Centre in Taiwan that it acquired from Avago Technologies in 2014.
“We are excited to have the NeoPhotonics low-speed product team join APAT, and look forward to having more products to sell to our largest customers as well as the opportunity this transaction creates for us to gain many new customers,” commented Rex Gu, founder and CEO of APAT OE.
Upon divesting the low speed business, NeoPhotonic’s expects its revenue growth rate for the continuing business to be higher as a result. What the company calls the low speed business generated $92.8 million in revenues and gross profit of $16.7 million in 2015, which fell to $50.7 million in revenue and $9.7 million gross profit over the first nine months of 2016.
The transaction is expected to close in January 2017.