Cabot Microelectronics (Aurora, Illinois) has agreed to buy KMG Chemicals (Fort Worth, Texas) for approximately $1.6 billion, including debt. The deal values KMG at $79.50/share, a 19% premium to KMG’s closing price on 14 August. The transaction is expected to close near the end of calendar 2018.
The deal nearly doubles Cabot Microelectronics’ revenue to $1 billion, with combined EBITDA of $320 million, and extends its business into high-purity process chemicals. KMG supplies acids, solvents and other wet chemicals used to etch and clean silicon wafers. Cabot Microelectronics is a supplier of high-performance polishing slurries and pads used in the chemical mechanical planarization (CMP) process for manufacture of advanced integrated circuit devices for the semiconductor industry.
“KMG’s industry-leading electronic materials business is highly complementary to our CMP product portfolio, while its performance materials business broadens our product offerings into the fast-growing industry for pipeline performance products and services,” said David Li, president and CEO of Cabot Microelectronics. The combined company will form “what we believe will be the preeminent, independent, semiconductor consumables platform in the world,” Li said on an investor call 15 August. “The combination will enhance our current product offerings with additional, mission critical materials, allowing us to better support our customers and aid in our goal to continue to profitably grow faster than the industries we serve.”
KMG’s performance materials business, which accounted for 17% of 2017 fiscal year sales, includes pipeline chemicals and wood treatment additives. KMG’s total revenue for the 2018 fiscal year ending 31 July is forecast at $460 million. Cabot Microelectronics had revenue of $570 million for the 12-months ended 30 June.
KMG’s electronic chemicals business was acquired initially from Air Products in 2007 and expanded with purchases similar businesses from General Chemical and OM Group.
Under the terms of the agreement, KMG shareholders will be entitled to receive $55.65/share in cash and 0.2 of a share of Cabot Microelectronics common stock, which represents an implied value of $79.50/share based on the volume-weighted-average closing price of Cabot Microelectronics common stock over the 20-day trading period ended on 13 August.
By Robert Westervelt
Source: Chemical Week
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