Cemtrex Announces Exchange Offer to Acquire Key Tronic Corp.
FARMINGDALE, N.Y.–(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 LLC
1212 Avenue of the Americas, 24th
Floor
New York, NY 10036
Banks and brokerage firms, please
call: (212) 297-0720
Stockholders and others call toll-free: (855)
208-8901
E-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.
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.
Contacts
Investor Relations
Cemtrex, Inc.
Saagar Govil, 631-756-9116
investors@cemtrex.com
