Wichita-based Koch Industries announced Monday that it was acquiring Molex Inc., a publicly traded global electronic components company founded by the Krehbiel family 75 years ago.
Under the terms of the agreement, Koch Industries will acquire all of Molex’s outstanding shares for $38.50 per share in cash, for a total equity value of about $7.2 billion, according to a news release from the two companies.
Molex stock on the Nasdaq rose more than $9 on the news Monday morning, and was hovering around $38.60 Monday afternoon.
The deal has been approved by both Molex and Koch’s boards of directors.
Molex, based in Lisle, Ill., operates 41 manufacturing locations in 15 countries and employs more than 35,000 people. After the purchase is complete, Molex is expected to be a standalone subsidiary of Koch Industries and will continue to be operated by the company’s current management team, according to the release.
The Krehbiel family has Kansas roots.
Family from Newton
The family came to the United States in the 1820s after emigrating first from Switzerland to Germany. The Krehbiels settled in Newton, where John Krehbiel built a wagon- and carriage-building business. He became one of the founders and chairman of Bethel College in North Newton. The family continues to support the college.
John Krehbiel’s son, Frederick Krehbiel, became the first of four generations involved in creating and growing the electrical and electronic components business.
Molex’s products include electronic, electrical and fiber-optic interconnection products and systems, such as switches, cable assemblies, terminals, antennas and application tooling.
It offers about 100,000 products through direct sales people and authorized distributors.
Molex, which had 2012 sales of $3.6 billion, is growing, and Koch will be able to help the company grow to double or triple its size, a Koch official said.
“They’re in a significant growth industry,” Steve Feilmeier, Koch’s chief financial officer, said.
In 10 years, Molex should have sales of $10 billion, Feilmeier said.
Investing in growth
The sale will help Molex with that growth.
“They realized that to grow the company to the next level, that they’re going to need a stronger parent to help them get there,” Feilmeier said. “They do a lot of great things already.”
Growth will be easier operating as a private company rather than as a publicly held company that pays dividends to shareholders, Feilmeier said.
“We’re going to direct all of the earnings of this company back into the company so they can reinvest in new products, plant expansions and to do acquisitions themselves where their capabilities would fit,” Feilmeier said. “We take a very long-term view.”
In a statement, Charles Koch, chairman and chief executive officer of Koch Industries, said: “Molex has become a global leader by focusing on product innovation and value creation, driven by its talented leadership and employees. We look forward to jointly applying the capabilities of our two companies to help take both to the next level.”
The acquisition matches up well with Koch’s culture and core capabilities, Koch said. “It also provides a significant new platform for growth,” he said.
Molex has expertise in electrical engineering and some of the best technology in the world, Feilmeier said.
For example, safety devices in cars that indicate to the driver how close the car is to another vehicle or an obstacle use Molex connectors.
Its connectors are used in cellphones, tablets and other devices.
In the 12 months that ended June 30, Molex introduced 226 new products and was granted 362 patents, the company said.
Molex has global capabilities; 70 percent of its revenue and employees are outside the U.S.; Feilmeier said. It built its first plant in China in 1984.
“They’ve been there for nearly 30 years,” Feilmeier said. “That kind of experience is invaluable. We were impressed.”
Since 2003, Koch has invested more than $50 billion in acquisitions and other capital expenditures.
Molex is Koch’s second-largest acquisition, behind Georgia-Pacific, which it bought in 2005 for $21 billion.
The deal with Molex began two months ago when one of Molex’s investment bankers contacted Koch, saying they might be a good fit, Feilmeier said.
Its management team then came to Wichita to describe what they do and how they do it, Feilmeier said.
“We were very impressed,” he said. “It caused us to want to go further (with exploring an acquisition), and we did.”
Koch’s ability to write a check to buy the company also was a plus because the deal isn’t dependent on securing financing.
It is subject to regulatory and shareholder approval.
The parties are planning to complete the deal by the end of the year.
The decision to sell was difficult, Fred Krehbiel, Molex board co-chairman, said in a statement. “But our board of directors and our family believe that this transaction, which follows a diligent and thorough review process by the board, provides outstanding benefits for all our stakeholders,” Krehbeil said.
Stakeholders will receive a significant premium and compelling value for their holdings, Krehbiel said.
“For our customers and employees, this transaction will allow us to build on Molex’s proud past and strengthen us for a powerful future,” Martin Slark, Molex vice chairman and CEO, said in a statement. “We are excited to work with Koch to continue our track record of growth and investment in people, innovation and technology.”