Cemtrex Announces Exchange Offer to Acquire Key Tronic Corp.
September 05 2017 - 8:30AM
Business Wire
Cemtrex, Inc. (Nasdaq:CETX) today announced an exchange offer to
acquire Key Tronic Corporation (Nasdaq:KTCC) by offering to
exchange each outstanding share of common stock of Key Tronic for
one share of Cemtrex common stock. The purpose of the offer is for
Cemtrex to acquire control of, and ultimately the entire interest
in, Key Tronic. This exchange offer is the first step in Cemtrex’s
plan to acquire all of the outstanding shares of Key Tronic, which
may not be completed through this offering and may be accomplished
through one or more transactions following this offering.
The complete terms and conditions of the exchange offer are set
forth in the registration statement on Form S-4, which includes a
letter from Cemtrex’s Chairman and Chief Executive Officer to Key
Tronic shareholders, and the other offering documents filed by
Cemtrex today with the Securities and Exchange Commission.
Reasons for the Offer
While Cemtrex is also in the electronics manufacturing services
(EMS) business similar to Key Tronic, Cemtrex’s EMS business is
engaged in designing, prototyping and manufacturing electronic
components in the most advanced and cutting-edge technologies that
are poised for significant growth in the coming years. Cemtrex
believes that there is a once-in-a-generation market opportunity in
a variety of electronics markets from the “Internet of Things,”
wearables, automotive electronics for driverless cars and advanced
robotic medical devices to autonomous industrial manufacturing that
will enable a half a trillion dollar electronics market opportunity
over the coming decade globally. Cemtrex already has a foothold in
these technologies through its German manufacturing operations and,
with the combined scale of Key Tronic, Cemtrex believes that the
collective company could capitalize on all of these market
opportunities to become a leading market provider for the most
advanced electronic technologies around the world. Cemtrex –
together with Key Tronic as its subsidiary – will have greater
momentum in securing a large market share of these technologies as
these markets develop.
Cemtrex management is growth-oriented and entrepreneurial and is
looking to build a global market-leading company through accretive
and strategic acquisitions. Over the last five years, Cemtrex has
delivered solid returns for its stockholders while Key Tronic has
failed to realize much stockholder value at all. Cemtrex believes
that under the leadership of Cemtrex, Key Tronic can be
repositioned to deliver significantly greater results for its
stockholders over the next five years.
Cemtrex believes the proposed combination of the two companies
is financially superior as compared to each company continuing to
operate independently for the following reasons:
Strong Track Record of Financial Growth. While Cemtrex
posted lower annual revenues than Key Tronic in its last fiscal
year, Cemtrex realized net income of $5.0 million, while Key Tronic
recognized net income of just $5.6 million, which is not
substantially higher than Cemtrex given Key Tronic’s larger
revenues. In addition, in its last fiscal year, Cemtrex realized
net income of $0.58 per share, whereas Key Tronic recognized net
income of only $0.51 per share. For these reasons, the difference
in the stock prices of the two companies should not be the primary
basis for assessing each company’s inherent value.
Cemtrex has demonstrated a track record of growth over the last
five years while Key Tronic has significantly underperformed.
Cemtrex has achieved an average return on equity (which is the
amount of net income returned as a percentage of stockholders’
equity) of over 75% over the last five years while Key Tronic has
achieved 9.7%. Cemtrex believes that with the acquisition of Key
Tronic, it may be able to achieve a higher than 10% return on
equity over the long term.
Positioning in High Growth Markets. Cemtrex’s strategy
over the last several years has been to position its business in
high growth markets while seeking out strategic acquisitions along
the way to deliver maximum value for its stockholders. This
strategy was highly effective over the last five years with
Cemtrex’s tangible book value per share increasing over 1,900%.
Cemtrex’s plan is to continue positioning itself in fast growing
markets and making strategic acquisitions.
Efficiencies of a Holding Company Structure with Shared
Financing. Cemtrex intends to continue running Key Tronic as a
wholly-owned subsidiary keeping the existing organizational
structure largely intact. Cemtrex would work with existing
competent and experienced management to shift the strategy for
higher long-term growth and ensure adequate resources are provided
to achieve our goals.
Cost Savings, Operational Synergies and Stockholder
Liquidity. Cemtrex estimates there would be approximately $5
million to $7 million in annual increased profit for Key Tronic if
it was operated by Cemtrex management as a subsidiary of Cemtrex.
The elimination of substantial public company costs would eventuate
into material savings in expenses. There would be other
opportunities for savings from operational synergies and shedding
low-value cost centers. There would be an increase in gross margins
and revenues for Key Tronic as it would enter into Cemtrex’s
cutting edge technology customer base.
Cemtrex believes its business model and financial resources
would construct an optimal platform for the combined company to
create long-term value for all stockholders.
About the Exchange Offer
The exchange offer is conditioned upon, among other things, the
registration statement for the issuance of Cemtrex common stock in
the exchange offer being declared effective by the Securities and
Exchange Commission and the approval by Cemtrex stockholders of any
required increase in its authorized common stock and, to the extent
required by the rules of the Nasdaq Stock Market, stockholder
approval of the issuance of Cemtrex common stock in the offer,
which the executive officers and directors of Cemtrex have the
voting power to approve. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission but has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective.
This press release is for informational purposes only and is
neither an offer to sell nor a solicitation of an offer to buy any
securities. Any exchange offer will be made only through a
registration statement and related materials. Investors and
stockholders of Key Tronic are advised to read this registration
statement and other disclosure materials (including other
disclosure materials when they become available) carefully because
they will contain (and will contain) important information.
Investors and stockholders may obtain a free copy of the disclosure
materials and other documents filed by Cemtrex with the Securities
and Exchange Commission at the SEC’s website at www.sec.gov. A free
copy of the disclosure materials and other documents of Cemtrex may
also be obtained from Cemtrex upon request by directing such
request to Okapi Partners LLC, the Information Agent for the
exchange offer:
Okapi Partners LLC1212 Avenue of the Americas,
24th FloorNew York, NY 10036Banks and brokerage firms, please call:
(212) 297-0720Stockholders and others call toll-free: (855)
208-8901E-mail: cemtrex@okapipartners.com
About Cemtrex
Cemtrex, Inc. (NASDAQ:CETX) is a world leading diversified
industrial and manufacturing company that provides a wide array of
solutions to meet today's technology challenges. Cemtrex provides
manufacturing services of advanced custom engineered electronics
design and manufacturing services, comprehensive industrial
services, monitoring instruments for industrial processes and
environmental compliance, and systems for controlling particulates,
hazardous gases, emissions of Greenhouse gases, and other regulated
pollutants. The Company is also in the process of developing its
own proprietary IoT and wearable devices.
www.cemtrex.com
Forward-Looking Statements
This release contains forward-looking statements relating to
Cemtrex’s exchange offer for all of the outstanding shares of Key
Tronic common stock and Cemtrex’s expectations with regard to the
proposed transaction. These forward-looking statements are based on
Cemtrex’s current intent, expectations, estimates and projections
and are not guarantees of future performance. These statements
involve risks, uncertainties, assumptions and other factors that
are difficult to predict and that could cause actual results to
vary materially from those expressed in or indicated by them. In
addition, some factors are beyond Cemtrex’s control. Factors that
could cause actual results to differ materially from the statements
made in this release include, among others: (i) the willingness of
Key Tronic shareholders to tender their shares in the exchange
offer and the number and timing of shares tendered; (ii) the
satisfaction, or waiver by Cemtrex to the extent legally
permissible, of all conditions to the exchange offer; (iii)
Cemtrex’s and Key Tronic’s ability to receive any and all necessary
approvals, including any necessary governmental or regulatory
approvals; and (iv) other factors as described in filings with the
Securities and Exchange Commission, including the factors to be
discussed under the heading “Risk Factors” in Cemtrex’s prospectus
included in its registration statement on Form S-4 as filed with
the Securities and Exchange Commission on September 5, 2017.
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version on businesswire.com: http://www.businesswire.com/news/home/20170905005332/en/
Investor RelationsCemtrex, Inc.Saagar Govil,
631-756-9116investors@cemtrex.com
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