Component November 21, 2019
Yageo to acquire Kemet for US$1.64 billion

Yageo to acquire Kemet for US$1.64 billion

Taiwanese Yageo Corp. and US Kemet Corp. have announced that they’ve entered a definitive agreement, approved by the board of directors at both companies, in which Yageo will acquire all outstanding shares of Kemet’s common stock. Yageo will be purchasing shares in an all-cash transaction with a total equity valued around US $1.64 billion.
Established in 1919, just a few miles from Aegis Components’ corporate office, Kemet has established itself as a leading global supplier of passive electronic components. Its global footprint now includes 23 manufacturing sites and approximately 14,000 employees. Yageo, founded in 1977, is a Taiwan based manufacturer of electronic components. Yageo has grown to a global footprint of 19 manufacturing sites and 8 R&D centers. The combination of Yageo and Kemet will create a powerhouse with combined annual revenues of around US 2.94 billion of the $28-$30 billion passive components industry. The transaction is subject to the receipt of regulatory approvals and customary closing conditions but is expected to close in the second half of 2020.

The acquisition is intended to have the following effects:

• Expand Yageo’s product portfolio. Enhancing their ability to serve as a one-stop product solution to customers by serving a larger range of segments and applications
• Enhance Yageo’s global footprint through an increased ability to penetrate attractive, high-growth segments and applications.
• Drive profitability with meaningful cost synergies and greater efficiencies. By leveraging KEMET’s structural transformation, they plan to sustainably increase margins and enhance the durability of their revenue base.
• Enable Yageo to leverage KEMET’s presence and success in Japan through the consolidation synergy of KEMET and TOKIN.
• Scale KEMET’s business in Greater China and ASEAN region through Yageo’s regional presence and sales channels.

Pierre Chen, Chairman and Chief Executive Officer of Yageo, said, “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.”
While these are the intended effects, there are often unintended consequences in mergers. This deal could bring an abundance of obsolescence issues in any products that are duplicated. Also, their diverse group of distributors will likely see a reduction.

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