FARMINGDALE, NY -- Cemtrex today announced an unsolicited stock-swap bid to acquire fellow EMS company Key Tronic. Key Tronic has not yet responded to the offer.
Under terms of the bid, Cemtrex is offering to exchange each outstanding share of common stock of Key Tronic for one share of Cemtrex common stock, with the intent to eventually acquire the entire company. Cemtrex said its plan might take multiple transactions to complete.
Cemtrex is considerably smaller than its bounty. For its fiscal year ended Aug. 1, Key Tronic reported total revenue was $467.8 million. Meanwhile, revenues at Cemtrex for the four quarters ended Jul. 1 were $124.5 million.
In its statement, Cemtrex pointed to the comparable end-markets and profitability as a basis for the deal. "Cemtrex believes that there is a once-in-a-generation market opportunity in a variety of electronics markets from the 'Internet of Things,' wearables, automotive electronics for driverless cars and advanced robotic medical devices to autonomous industrial manufacturing that will enable a half a trillion dollar electronics market opportunity over the coming decade globally. Cemtrex already has a foothold in these technologies through its German manufacturing operations and, with the combined scale of Key Tronic, Cemtrex believes that the collective company could capitalize on all of these market opportunities to become a leading market provider for the most advanced electronic technologies around the world. Cemtrex – together with Key Tronic as its subsidiary – will have greater momentum in securing a large market share of these technologies as these markets develop."
Cemtrex pointed to its net income of $5 million in its past fiscal year, versus Key Tronic's recognized net income of $5.6 million, saying the latter is
Cemtrex also fired a shot at Key Tronic's management, arguing that the latter has failed to grow its stock quickly enough. "Over the last five years, Cemtrex has delivered solid returns for its stockholders while Key Tronic has failed to realize much stockholder value at all. Cemtrex believes that under the leadership of Cemtrex, Key Tronic can be repositioned to deliver significantly greater results for its stockholders over the next five years."
Cemtrex is publicly traded but 71% of its 10.25 million shares are held by insiders or 5% or greater owners. Key Tronic has 10.76 million shares outstanding, more than half owned by institutional investors or mutual funds. Interestingly, far more investors are short on Cemtrex than Key Tronic -- 652,00 vs. 36,000, suggesting shareholders see more upside in Key Tronic.
Key Tronic was the CIRCUITS ASSEMBLY EMS Company of the Year in 2009.