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NeoPhotonics has announced that it executed a definitive agreement, to sell its Access and Low Speed transceiver product lines (the “Low Speed Business”) to APAT Optoelectronics Components Co. of Shenzhen, China, a designer and manufacturer of optical sub-assemblies for telecom and datacom markets.

The assets to be sold include the intellectual property, inventory and fixed assets for NeoPhotonics’ PON products including GPON and GEPON transceiver products at up to 10G data rates, plus 10G and below telecom, bidirectional and specialty transceiver products.

The transaction is valued at approximately $26.4 million, inclusive of post-closing payments under a Transition Services Agreement. The transaction value 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 consideration consists of not less than the equivalent of $23.0 million to be paid in cash in China Renminbi at close and not more than $2.0 million in a US dollar denominated promissory note. In addition, the purchaser will assume outstanding supply chain purchase commitments and will 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 transaction warranty commitments of NeoPhotonics. The transaction is subject to customary closing conditions and is expected to close in January 2017. The purchaser is further subject to a $1.0 million breakup fee to be held in escrow, which will be applied to the purchase price upon closing or forfeited if the transaction does not close due to certain reasons attributable to the purchaser.

The secured promissory note of up to $2.0 million is for an initial term of six months with an initial interest rate of 6.0% per annum. The note is renewable at six month intervals with an increase in the interest rate by an additional 4% per annum. The note will be secured by inventory and certain fixed assets being purchased in the transaction.

In 2015, and for the first 9 months of 2016, the Low Speed Business generated $92.8 million and $50.7 million in revenue, respectively, and gross profit of $16.7 million and $9.7 million, respectively. Net assets for the business were approximately $18.0 million as of September 30, 2016.