August 15, 2018 / 12:45 PM / 4 months ago

Cabot Microelectronics to buy KMG Chemicals in $1.6 billion deal

(Reuters) - Cabot Microelectronics Corp (CCMP.O), a maker of chemicals used in semiconductors, said on Wednesday it would buy specialty chemicals company KMG Chemicals Inc KMG.N in a cash-and-stock deal valued at $1.6 billion.

The deal will expand Cabot’s reach into the market for pipeline performance products and services, Chief Executive Officer David Li in a statement.

KMG provides products and services for the industrial wood preservation and global pipeline and energy markets through its performance materials segment. The company’s electronic chemicals business makes chemicals for the semiconductor industry.

KMG shareholders will get $55.65 in cash for each share held and 0.2 of a share of Cabot common stock, implying a per share value of $79.50. The deal represents a premium of about 19 percent to KMG’s last close.

KMG’s shares were trading at $73.45 before the bell on Wednesday, well below the offer.

Excluding debt, the deal has an equity value of $1.23 billion according to Reuters calculations.

The combined company is expected to have annual revenue of about $1 billion and about $320 million in earnings before interest, tax, depreciation and amortization.

KeyBanc Capital Markets was the financial adviser to KMG, while Cabot was advised by Goldman Sachs & Co.

Reporting by John Benny in Bengaluru; Editing by Anil D'Silva

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