Koch Industries has agreed to purchase Molex Inc. for $7.2 billion in a transaction that will bring the 75-year old electronic components manufacturer into the fold of one of the world’s biggest and privately-owned industrial conglomerates.
The transaction represents Koch’s deepest foray into the electronics industry and marks one of the biggest acquisitions in years for an economic sector that is often characterized by rapid technology shifts as well as margin-corroding commoditization. The acquisition sends a signal through the industry that the often underplayed interconnects, passives and electromechanical components market can be transformed into a money-spinning business in the right hands.
Koch is paying a hefty 42 percent premium to secure Molex, a major supplier of fiber optic interconnect systems based in Lisle, Ill., and one of the industry’s more diversified suppliers. Molex’s products are used in a wide range of industry segments, including the information technology market, automotive, communications, medical, military and aerospace. The company recorded sales of $3.6 billion in the fiscal year ended June 30, 2013, up from $3.5 billion in fiscal 2012.
"After 75 years this was a difficult decision, 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,” said Fred Krehbiel, co-chairman of the Molex board of directors and member of the company’s founding family. “Importantly, our shareholders will receive a significant premium and compelling value for their holdings. The transaction is expected to provide substantial opportunities for our worldwide employees, many of whom have spent much of their working lives at Molex and are responsible for the company's long term success.”
The transaction once completed would enable Molex expand into non-traditional market segments and also enable the management conduct any necessary reorganization and growth strategies away from the glare of public scrutiny.
"For our customers and employees, this transaction will allow us to build on Molex's proud past and strengthen us for a powerful future," said Martin Slark, vice chairman and chief executive officer of Molex.
Koch said it expects to retain the current management at Molex and would not change its name or move the head office from Lisle. It is expected that Molex, which tends to focus on proprietary products to distinguish itself in a highly price sensitive market, would deepen this strategy under Koch.
"Molex has become a global leader by focusing on product innovation and value creation, driven by its talented leadership and employees," Charles Koch, chairman and CEO of Koch Industries said in the statement referenced above. "We look forward to jointly applying the capabilities of our two companies to help take both to the next level."