Cemtrex Makes Exchange Offer to Acquire Key Tronic
On September 5, 2017, Cemtrex announced its intention to issue an exchange offer for Spokane, Washington-based EMS company Key Tronic (KTCC). Terms of the move specified that Cemtrex would offer to exchange each outstanding share of common stock of Key Tronic for one share of Cemtrex common stock.
As part of the announcement, Cemtrex Chairman and CEO, Saagar Govil, also issued a letter to Key Tronic shareholders outlining the terms of the offering set forth in an S-4 that has been filed with the SEC. Key Tronic has operated in the EMS industry for more than 40 years and has operations in several US cities, Juarez, Mexico and Shanghai, China. In August the company reported FY2017 revenues of more than $465mn.
We note that the disparity in recent prices of Key Tronic and Cemtrex suggest that the offer indicated would likely be only a first step in any acquisition process. In a follow-up to the announcement, issued on September 13, 2017, Cemtrex management reiterated its outlook for the company to achieve approximately 30% YoY topline growth in FY17E, with revenues expected to be in a range of $118mn to $120mn. The company has also formed Cemtrex Advanced Technologies, a subsidiary focused on growth opportunities in the technology industry, including what management described as a "once-in-a-generation" opportunity in electronics for "Internet of Things," wearables, and its own line of proprietary high tech products, such as the recently announced enterprise smart desk.
