NEW YORK – Molex Inc., a maker of electronic components for products such as Apple’s iPhone, has agreed to a $7.2 billion acquisition by Koch Industries Inc., the holding company controlled by the billionaire Koch brothers.
Koch will buy Molex’s shares for $38.50 apiece, a 31 percent premium over the publicly traded common stock, according to a statement Monday. The companies expect to complete the transaction by the end of the year.
Koch, a closely held company that owns everything from biofuel and fertilizer makers to commodity-trading services, is using the acquisition to expand into connector components. The deal won the support of the Krehbiel family, which has controlled Molex since it began life as a manufacturer of moldable plastic in 1938.
“It’s a bit of a surprise since it had been family-owned for such a long time,” said Shawn Harrison, an analyst at Longbow Research in Independence, Ohio. “It’s a significant premium – the valuation is a bit higher than Molex’s peers.”
Molex jumped 32 percent to $38.63 at the close in New York. The stock had climbed 7.4 percent this year before Monday.
The deal will turn Molex into a stand-alone division of Koch, with the company retaining its name and headquarters in Lisle, Ill. Molex sells interconnection systems to automakers, mobile-phone companies and military customers. That includes Apple, which uses some Molex connectors for the iPhone 5, the top-selling smartphone.
The transaction values Molex at 1.9 times revenue and 11.2 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. In surveys of comparable deals, the median price paid was 0.8 times revenue and about 8.5 times EBITDA.
Investors are getting “a significant premium and compelling value for their holdings,” Fred Krehbiel, the 72-year-old grandson of Molex co-founder Frederick August Krehbiel, said in Monday’s statement. His family holds sway over the company through a dual-class share structure.
“After 75 years this was a difficult decision,” said Krehbiel, who serves as co-chairman of Molex’s board. “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.”
For Koch, the transaction is its biggest deal in eight years and provides a “significant new platform for growth,” the company said. The acquisition is the second-largest in Koch’s history, after the 2005 purchase of Georgia-Pacific for $13.2 billion, excluding debt, according to data compiled by Bloomberg.
Koch will have to cut costs to make the deal work, Harrison said. By taking Molex private, Koch will save the expense of operating a public company and paying the dividend, which is about $170 million a year, he said.