(Yicai) Nov. 27 -- Vantone Neo Development Group plunged by the exchange-imposed limit today after the Chinese property developer said it is buying a no-less-than 51 percent stake in Source Photonics Holdings, a US developer of optical communication devices, as part of the firm's strategy to branch into new fields.

Vantone’s share price [SHA:600246] sank 10 percent to close at CNY7.56 (USD1), despite rebounding shortly before the end of trading. The stock had been doing very well just before the deal was made public, as it jumped by almost the exchange-imposed limit on the previous trading day. It has gained about 66 percent in value in the last six weeks.

The buyer and sellers agrees to value the whole target company at USD620 million as the basis for the deal, and Vantone will make a payment of USD50 million as special loan to Source Photonic’s branch in Chengdu, southwestern Sichuan province, just after the agreement was signed, the Beijing-based company said yesterday, citing the deal signed between Vantone and dozens of Source Photonic’s current shareholders. If the deal eventually gets through, the loan shall become part of the fund Vantone pay for the equity at a price of USD2.6179 per share.

Vantone will still carry out due diligence of Source Photonics and the planned investment might be altered if the California-based firm is found to have significant risks or to have provided inconsistent data, Vantone said, without providing any further financial details.

Source Photonics makes optical chips, components and modules for data centers, 5G networks and other access networks, Vantone said. Registered in the Cayman Islands, it has research and development hubs as well as manufacturing facilities outside of the US in China's Chengdu, Changzhou and Taiwan.

Source Photonics logged net profit of USD26.8 million and revenue of USD226 million in 2022, according to its annual financial report. The firm had net assets of USD124 million and total assets of USD319 million as of the end of last year.

Vantone still makes most of its money from real estate development and property leasing. In the first three quarters, Vantone posted earnings of CNY360 million (USD50.3 million), which includes CNY174.6 million from real estate sales and CNY158.1 million in rentals.

Editor: Kim Taylor