KMG Buying OM Group's Ultra Pure Chemicals
Apr 29th 2013 5:19PM
Updated Apr 29th 2013 6:00PM
KMG Chemicals is buying OM Group's Ultra Pure Chemicals subsidiaries in the U.S., U.K., Singapore, and perhaps in France as well.
On Monday, OM announced the signing of definitive agreements to sell the first three subsidiaries to KMG, and said it has also offered to sell KMG the French subsidiary. Combined, the four subsidiaries would sell for $60 million cash in a deal set to close before the end of June.
OM CEO Joe Scaminace described the sales as "another step to optimize our portfolio and sharpen our strategic focus." If the sales go through, they will also be an example of some pretty sharp dealmaking on OM's part.
With $94 million in 2012 sales of "ultra pure chemical solutions" used in semiconductor and microelectronics manufacture, OM is unloading its subsidiaries for a price of about 0.64 times annual sales. OM's overall corporate P/S ratio, in contrast, is only 0.47 times sales, so the divestitures are bringing a higher valuation than the company as a whole commands.
From its perspective, KMG is also getting a deal, buying subsidiaries at a valuation below its own 0.83 P/S ratio.
Shares of KMG are nonetheless down a fraction of a percent, closing at $18.48 Monday. OM Group shares, in contrast, gained 2% to close at $24.52.
The article KMG Buying OM Group's Ultra Pure Chemicals originally appeared on Fool.com.Fool contributor Rich Smith has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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