Shares of Kemet Corporation (NYSE:KEM) are soaring this morning, up 12.3% as of 10:50 a.m. EST on news that the Fort Lauderdale-based producer of electronic components has agreed to sell itself to Taiwan's Yageo Corporation in an all-cash transaction.
Yageo will be paying $27.20 for each share of Kemet outstanding. Including assumed debt, the deal is valued at $1.8 billion, which Kemet notes is a 26% premium over its average share price over the last 30 trading days.
Both companies' boards of directors have already signed off on this price.
Kemet's stock has already been performing pretty well, up 33% so far this year alone, yet the stock still sells for a very low valuation of under eight times earnings. That being the case, there may be some reluctance among shareholders to sell out to Yageo when the business is doing so well -- sales are up 5% in the most recent quarter, and profits are up 15%, for example. (Indeed, since the merger was announced, two shareholder derivatives lawsuits have already been announced, investigating the deal's fairness.)
Regardless, Kemet management believes that "the certainty of immediate cash to our shareholders at a premium" will ultimately convince shareholders to approve this deal. Assuming that happens and regulators approve, this merger should close sometime in the second half of 2020.