POET Technologies to buy DenseLight Semiconductors

POET Technologies Inc. (OTCQX:POETF) (TSX-V:PTK), which has developed a module-on-a-chip process that integrates digital, high-speed analog, and optical functions on the same device, says it has agreed to acquire privately held DenseLight Semiconductors Pte. Ltd. of Singapore, which makes photonic sensing and optical light source products. The mostly stock transaction could be worth as much as approximately $15.73 million if DenseLight hits a specified revenue target this year.

DenseLight develops and manufacturers III-V based optoelectronic devices and photonic integrated circuits via in-house wafer fabrication and assembly and test facilities. POET (which stands for "Planar Opto-Electronic Technology") has yet to formally announce a product based on its technology. The acquisition of DenseLight will provide a revenue stream via its existing products, as well as a fab infrastructure and access to product sales and channel distribution networks for POET's eventual offerings. DenseLight enjoyed US$2.6 million in revenues last year, POET says.

As to what those future products might be, POET says its potential new assets will enable the company "to better service the end-to-end data communications market." The company also will acquire intellectual property and expertise in such other areas as PON that POET sees as complementary to data communications (see "DenseLight announces entry into PON component market"). Information on POET's website indicates the company may be focused initially on development and sale of transceiver chips targeted at short reach and very short reach applications, which could be launched in 2017.

"The acquisition of DenseLight Semiconductor reflects a new chapter in our history, and serves as a significant step in realizing the promise of our product roadmap and strategic plan we established in September 2015," said Dr. Suresh Venkatesan, POET's CEO. "This synergistic combination can provide our customers a broader range of differentiated photonics technologies. The resulting enhancement of our design, test, and packaging capabilities also promises to optimize time-to-revenue for our customers. POET now has a larger product portfolio to enhance our mission of enabling integrated photonic products for our expanded end markets."

The transaction structure has multiple layers. POET will grant DenseLight shareholders US$10.5 million in common stock, with another $1 million in stock possibly going to them if DenseLight hits a revenue target this year that POET did not reveal. In addition, POET will issue approximately $2,537,368 in shares to cover debt, as well as pay $1,689,353 in cash over a 9 month period for the same purpose.

POET says it expects the transaction to close May 10, 2016. However, this acquisition may not be all that management has planned. "While DenseLight is a strategic acquisition, the Company is also engaged in advanced stages of other avenues that it expects will accelerate the path to revenue over the next 12 months and further POET's monetization strategy," the company stated in the press release announcing the acquisition agreement.

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