Cabot Microelectronics agrees to buy KMG for US$1.2 bil

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HOUSTON (Aug 15): Cabot Microelectronics Corp agreed to acquire KMG Chemicals Inc for US$1.2 billion, in an effort to strengthen its position as a supplier to the semiconductor industry.

“KMG’s industry-leading electronic materials business is highly complementary” to Cabot’s portfolio in polishing pads for chipmakers, Cabot Chief Executive Officer David Li said in a prepared statement Wednesday. “Its performance-materials business broadens our product offerings into the fast-growing industry for pipeline performance products and services.”

KMG shareholders will receive US$55.65 in cash plus 0.2 Cabot share for each share of KMG stock. The offer implies a value of US$79.50 a share for KMG, according to the statement, a premium of 19% over its closing price Tuesday. The companies valued the purchase at US$1.6 billion including debt.

KMG jumped 14% to US$76 before the start of regular trading in New York. The shares had climbed 1.2% this year through Tuesday. Cabot dropped 4.4% premarket.

Aurora, Illinois-based Cabot, expects the deal to add to its free cash flow and earnings in its first year, excluding acquisition and integration-related costs.

The deal is anticipated to close near the end of this year, subject to customary conditions and the approval of shareholders of KMG, which is based in Fort Worth, Texas.