PATEO CONNECT Technology (Shanghai) Corporation announced the closing of its discloseable transaction on 2 October 2026, acquiring 53,518,613 shares—approximately 70%—of an unnamed Fabless optical-communication chip company (the “Target”). The Target has become a non-wholly owned subsidiary and will be fully consolidated into PATEO’s financial statements from the completion date.

The deal, first unveiled on 7 August 2026, sets a maximum consideration of RMB1.40 billion, of which up to 70% may be funded through bank loans, with the balance to be settled from PATEO’s internal resources. Management confirmed that no proceeds from the company’s recent initial public offering will be used.

Independent valuer China Enterprise Appraisals assessed the market value of 100% of the Target’s equity at RMB2.70 billion as of 31 December 2025. The valuation employed a market approach using an adjusted average EV/Sales multiple of 12.69x derived from three A-share comparables—Xiamen UX IC, Maxscend Microelectronics and Henan Shijia Photons. Applying this multiple to the Target’s 2025 revenue of RMB305 million resulted in an enterprise value of RMB3.87 billion. After adjusting for net surplus assets and a 30.8% discount for lack of marketability, the equity value was finalised at RMB2.70 billion.

Performance undertakings from the sellers cover fiscal years 2026-2028: minimum consolidated revenue targets of RMB480 million, 620 million and 800 million, and pre-tax profit floors of RMB45 million, 90 million and 120 million, respectively. If the aggregate revenue or profit achievement ratio over the three-year period falls below 70%, the cash consideration will be proportionally reduced, with compensation from the sellers and the Target’s de facto controller capped at RMB100 million.

A subsequent purchase mechanism allows PATEO to acquire the remaining 30% stake, subject to (1) stability of the Target’s 40-member core team and (2) either early fulfilment of the performance targets or receipt of pre-tax sales orders exceeding RMB250 million from key customers by 30 June 2027. The follow-on valuation is capped at RMB2.50 billion for 100% equity, providing upside for outperformance while limiting PATEO’s future outlay.

Strategically, the acquisition bolsters PATEO’s capabilities in high-speed in-vehicle optical communications—a critical enabler for data-intensive applications such as autonomous driving, advanced driver-assistance systems, and smart cockpits. By combining PATEO’s automotive customer base with the Target’s chip-design expertise, the group aims to capitalize on rising demand for high-bandwidth, low-latency data transmission within electrified and AI-enhanced vehicle architectures.