On November 11, 2019, Yageo and Kemet announced they have entered a definitive agreement under which Yageo will acquire all the outstanding shares of Kemet’s common stock for $27.2 per share. This all-cash US $1.8 billion transaction has been approved by both companies’ board of directors and is expected to finalize in the second half of 2020. Upon close of the transaction, Kemet will become a subsidiary entirely owned by Yageo and will no longer be listed on any public market.
After the announcement, Pierre Chen, chairman of Yageo, told reporters in a media conference that “the acquisition of Kemet helps Yageo find the last missing piece of its MLCC portfolios in automotive and industrial devices, which are dominated by European and Japanese suppliers. … Yageo has been squeezing profits by boosting volumes and improving [operational] management in the past. Now, the company finally gets the chance to have a taste of the cream of the crop.”
This is not the first M&A deal for Yageo in recent years. In 2016 and 2017, Yageo acquired several Taiwan-based passive components manufacturers, such as Jamicon and Ralec.
With all of its acquisitions, Yageo is now the third-largest passive manufacturer in the global market. The move to acquire Kemet will enhance Yageo’s capability to:
1) Provide more product offerings
Kemet is the top supplier of tantalum capacitors in the market, while Yageo currently doesn’t have any tantalum capacitor product. By acquiring Kemet, Yageo will rank third in the MLCC market and first in the resistor and tantalum capacitor market.
2) Expand market share in high-end automotive, industrial and 5G verticals
Kemet’s product in these segments will help Yageo to structurally transform its product category to improve profitability and increase efficiency.
3) Break into more geographic regions:
14% of Kemet’s revenue came from Japan and Korea, which will help Yageo grow in these markets. Kemet’s presence in North America and EMEA will also help Yageo’s performance in these markets.
On the other hand, Yageo’s strong presence in Greater China and ASEAN region will help scale Kemet’s business.
William M. Lowe, Jr., CEO of KEMET, commented, “This transaction is in the best interests of KEMET shareholders, customers and employees, and is a testament to our team’s dedication to providing our customers with the broadest selection of passive component technologies and superior service in the industry.”
For the global electronics industry, Yageo’s acquisition of Kemet is big news. Like other M&A deals, there is the potential for issues with lead time, product availability, and product obsolescence. With the highly anticipated demand boom of passive components in 5G, IoT, and electronic vehicles, it is crucial for OEM and EMS companies to take a closer look at their passive-component sourcing strategy in the coming years. Procurement professionals should highly consider working with experienced and credible distributors, such as America II and Advanced MP Technology, on multiple-year-buy, bonded inventory and VMI programs for mission-critical passive components.