NeoPhotonics agrees to sell FTTH, lower-speed optical transceiver lines to APAT Optoelectronics

NeoPhotonics (NYSE: NPTN) says it has agreed to sell its FTTH and transceiver lines for applications of 10 Gbps and below to APAT Optoelectronics Components Co., Ltd. The Shenzhen, China, based designer and manufacturer of optical subassemblies for telecom and datacom applications will pay approximately $26.4 million, inclusive of post-closing payments under a transition services agreement, for the assets.

The $26.4 million includes a $25.0 million purchase price plus an additional equivalent of $1.4 million to be paid as certain transition services are delivered. APAT OE will pay at least $23.0 million in China Renminbi and not more than $2.0 million in a US dollar denominated promissory note. The company also will assume outstanding supply chain purchase commitments and be responsible for payment of value-added tax 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 NeoPhotonics transaction warranty commitments.

The product lines within what NeoPhotonics calls "the Low Speed Business" comprise the company's PON products, including GPON and GEPON transceiver products at up to 10G (see, for example, "NeoPhotonics introduces 10G PON transceivers for FTTP networks" and "NeoPhotonics offers PON OLT optical transceivers with embedded OTDR functions"), as well as optical modules for 10 Gbps and below telecom, bidirectional, and specialty applications. The Low Speed Business generated $92.8 million in revenue and $16.7 million in gross profit during 2015; for the first nine months of this year, the business saw $50.7 million in revenue and gross profit of $9.7 million. Net assets for the business were approximately $18.0 million as of September 30, 2016.

"After a comprehensive evaluation of the alternatives available for the Low Speed Business, we believe this transaction will best benefit our shareholders, customers, and employees," said NeoPhotonics CEO Tim Jenks. "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.

"We believe the Low Speed Business will benefit from APAT OE's expertise in access and PON products while continuing to provide quality products, support and services to customers," Jenks concluded.

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