Navitas Semiconductor Is Going Public With a SPAC Merger

Navitas Semiconductor said on Friday that it will be merging with special purpose acquisition company (SPAC) Live Oak Acquisition Corp II (NYSE: LOKB) to go public.

The deal values Navitas at a post-money equity value of $1.4 billion. The company is working on developing a new type of semiconductor technology that it hopes can revolutionize the chip industry.

Here’s what SPAC investors need to know.

What Navitas does

Navitas is working on power integrated circuits (ICs) based on gallium nitride (GaN), which it believes can facilitate massive technological improvements compared to traditional silicon-based chips. GaN technology can run 20 times faster and deliver 3 times more power or 3 times faster charging in half the size and weight, according to Navitas. 

GaN is especially promising in industries where power efficiency is of critical importance, such as mobile devices or electric vehicles (EVs), among others. Additionally, GaN ICs can yield cost savings of around 20% on average.

Navitas says that it has already overcome many important challenges to commercializing GaN, such as historically low manufacturing yields, poor reliability, overly complex component designs, and high costs. The chip market is approaching an important inflection point where GaN is on the cusp of mass market adoption as costs decline and become competitive with silicon, according to Navitas.

The company estimates that its total market opportunity is $13.1 billion when including important end markets like smartphones, EV inverters, 5G base stations, and data center servers. Navitas is optimistic that GaN ICs will eventually displace “a significant portion” of silicon-based ICs that dominate the market today.

Revenue in 2020 was $12 million and sales in 2021 are expected to jump to $27 million. Despite recent concerns that the SEC is looking to crack down on overly ambitious forward-looking forecasts, Navitas suggests that revenue could skyrocket to $640 million in 2026.

How the deal is structured

The merger with Live Oak Acquisition Corp II will raise approximately $400 million in gross proceeds, assuming minimal redemptions by the SPAC’s public shareholders. Live Oak II has around $253 million in cash in its trust account, and the SPAC has lined up $145 million in additional financing from PIPE (private investment in public equity) investors. Live Oak II says that the PIPE was oversubscribed, commanding strong interest from institutional investors.

The transaction assigns Navitas with a post-money equity value of $1.4 billion and an enterprise value of just over $1 billion. All existing Navitas shareholders will roll over their equity into the new company. The SPAC shareholders will end up owning 18.1% of the combined company, with the PIPE investors grabbing a 10.4% stake. The SPAC sponsors have secured a 3.5% position, while existing shareholders will represent the remaining 67.9%.

The merger is expected to close in the third quarter, and Navitas has not designed a new ticker symbol yet.

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