When Fake Buys Make Real News

M&A specialists in the electronics industry seem to have caught a case of merger mania. In the process, they unfortunately have seem to have learned the worst traits of the buyout crowd.

A pair of unsolicited bids were announced this week. In one instance, a small EMS company announced its interest in a much larger competitor. In the other, a Chinese connector manufacturer made a play for a smallish Canadian EMS/ODM.

What makes these cases interesting are the details.

In the former, Cemtrex, a company with trailing four quarter revenues of $125 million and a market cap of $31 million, made a play for Key Tronic, a top 50 worldwide EMS that reported sales of $468 million for its just completed fiscal year. Key Tronic’s market cap is $74 million, so Cemtrex’s offer of a one-for-one stock swap was a huge discount to Key Tronic’s value.

Not only that, says Key Tronic, it wasn’t really even  an offer:  “Based on (Cemtrex’s) current SEC filings, Key Tronic understands that Cemtrex has not commenced a formal exchange offer and that any such offer would require additional SEC filings by (Cemtrex),” Key Tronic said.

In the latter, Shenzhen Kaizhong Precision Technology made a written offer for Pacific Insight Electronics. The wrinkle here is, not only was Pacific Insight taken by surprise, it is already under agreement to be purchased by Methode Electronics.

The ODM today confirmed receipt of a written buyout proposal from Chinese connector maker. However, Pacific Insight has already agreed to be acquired by Methode Electronics, whose offer Pacific Insight says is superior to Kaizhong’s. Pacific immediately urged shareholders to reject the unsolicited bid.

Publicly traded companies such as Key Tronic and Pacific Insight have a fiduciary responsibility to their shareholders. However, from time to time outsiders try to make waves or generate publicity by pulling stunts like these. I’m not saying the interest communicated by Cemtrex or  Kaizhong is false, or even misplaced. But in both cases, I think the suitors are overplaying their hands.

 

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About Mike

Mike Buetow is editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He is also vice president and editorial director of UP Media Group, for which he oversees all editorial and production aspects. He has more than 20 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow