Are Kemet Shareholders Getting Enough in the Buyout?

Kemet Corp. (NYSE: KEM) shares shot up on Tuesday after the firm announced that it would be acquired by the Taiwanese firm Yageo. Although this offering values Kemet near multiyear highs, this still pales in comparison to what the stock was worth in the early 2000s.

Under the terms of the deal, Yageo will acquire all the outstanding shares of Kemet’s common stock for $27.20 per share in an all-cash transaction with a total value of $1.8 billion.

The purchase price represents a premium of 26% to Kemet’s volume-weighted average price for the last 30 trading days and 37% for the last 90 trading days.

It’s worth pointing out that this price values the transaction at roughly 7.6 times earnings, and this is very low for the diversified electronic industry. So while the price might look favorable on the surface, it values Kemet at near the bottom of its field.

Pierre Chen, board chair and chief executive of Yageo, commented:

Kemet has remarkable technology innovation capabilities and a proven track record of integrating cross-border acquisitions. We have been following their success with great admiration and look forward to creating a new legacy for the combined company. Kemet gives us the extraordinary opportunity to combine our strengths to achieve synergies in product and technology offerings as well as geographic coverage. The integration will enhance our ability to serve customers in consumer electronics as well as in the high-end automotive, industrial, aerospace, telecom and medical sectors. I look forward to partnering with Kemet’s employees to drive future growth and deliver enhanced value for our shareholders and customers.

The boards of directors of both companies have approved the transaction.

Shares of Kemet traded up about 12% to $25.80 on Tuesday, in a 52-week range of $15.55 to $25.89. The consensus price target is $25.67.