Japan-based Kyocera Corp. and U.S component supplier AVX have entered into a definitive merger agreement, whereby Kyocera would acquire all the outstanding shares of common stock of AVX not already owned by Kyocera for $21.75 per share. Kyocera currently owns approximately 72% of AVX. Once the transaction closes, AVX will become a wholly owned subsidiary of Kyocera.
Should the deal go through, it would the second U.S. passive component supplier to be acquired by a Far East company in recent months. Taiwan’s Yageo Corp. acquired AVX’s rival Kemet in November in a cash transaction valued at $1.8 billion.
The $21.75 offer price represents a 44.6% premium over AVX’s closing price on November 26, 2019 (the last trading day prior to the announcement of Kyocera’s initial proposal to acquire all of the outstanding shares of common stock of AVX not owned by Kyocera).
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Kyocera has long owned part of AVX, with the companies merging in 1990 in a stock deal, according to a report on Roskill.com. In 1995, Kyocera gave AVX partial independence by allowing 25% of it to be listed on the NYSE, while retaining the other 75%. According to the Roskill report, the move enabled AVX to function with a degree of independence as long as it delivered healthy profits and cash.
Up to 2019, passive component suppliers rode the electronics industry boom of recent years, seeing soaring demand and experiencing extended lead times for some parts. But when the industry slumped last year, the fortunes of passive component suppliers quickly reversed. Their once-robust sales and profits tumbled and once-bare inventories bloated.
Given how quickly market conditions in the passive components sector have changed, it is perhaps not surprisingly that larger, cash rich Far East companies pounced on the opportunity to acquire passive components suppliers such as AVX and Kemet, which have solid product lines and technology but have struggled financially recently.