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Semiconductor Value Chain

Koch Industries Scoops Up Molex for $7.2 Billion

09 September 2013

Koch Industries Inc. will acquire fiber-optic interconnect components supplier Molex Inc. for about $7.2 billion under the terms of a definitive agreement between the two companies announced Monday (Sept. 9).

Under the terms of the deal, Molex will become a standalone subsidiary of Koch, a privately held, diverse multi-national firm with about $115 billion in annual revenues. Molex, a 75 year old firm, will continue to operate under the company's current management team. Molex will also retain its company headquarters in Lisle, Ill.

Koch agreed to pay $38.50 in cash for each outstanding share of Molex, a premium of about 30 percent over the company's opening share price Monday. Koch expects the transaction to close by the end of this year.

Fred Krehbiel, co-chairman of Molex's board, said through a statement that the decision to sell the company to Koch was a difficult one. "But our board of directors and our family believe that this transaction, which follows a diligent and thorough review process by the board, provides outstanding benefits for all our stakeholders," Krehbiel said.

For Koch, the transaction is its biggest deal in eight years and provides a "significant new platform for growth," the company said. The acquisition is reported to be the second largest in Koch's history, after the 2005 purchase of Georgia-Pacific Corp. for $13.2 billion, excluding debt, according to a report by the Bloomberg news service.

Koch will have to cut costs to make the deal work, according to Shawn Harrison, an analyst at Longbow Research. By taking Molex private, Koch will save the expense of operating a public company and paying the dividend, which is about $170 million a year.

Molex is the first hi-tech electronics company to be acquired by Koch. Molex invests roughly 5 percent of net revenue in research and development every year, which is among the industry's highest levels of R&D investment, according to the company.

Apple buys connectors for mobile devices from Molex. According to the Wall Street Journal, sales to Apple accounted for 14 percent of Molex's total revenue of $3.62 billion in the fiscal year ended June 30.

Molex operates 41 manufacturing locations in 15 countries and employs more than 35,000 people globally. Over 70 percent of Molex's revenues come from products sold outside the United States.

Koch Industries, based in Wichita, Kan., is run by the billionaire brothers Charles and David Koch. It is one of the largest private companies in America.

Since 2003, Koch companies have invested about $50 billion in acquisitions and other capital expenditures, according to the company.



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