CIFUS Review Clears the Path for Yageo’s Acquisition of KEMET

Now that Yageo Corporation has secured approval from regulatory bodies in the U.S. and China for its acquisition of Florida-based KEMET Corporation, the Taiwanese electronic component manufacturer is gearing up to scale its product offerings and geographic presence even more. 

The $1.8 billion acquisition of KEMET Corporation, known for its capacitors and other passive electronic components, will allow Yageo to broaden sales to new regions and market segments, including automotive electronics, 5G, communications, robotics, automation, and industrial applications. 

KEMET’s product portfolio includes inductors, ceramic, polymer and tantalum capacitors, aluminum electrolytic components, AC film capacitors, sensors and actuators, supercapacitors, relays, and varistors. The company currently holds over 1,600 patents and trademarks worldwide. 

Under the terms of the deal, Yageo will acquire all outstanding KEMET shares for $27.20 each. The merger of the two entities will create combined annual revenues of $3 billion, with Yageo earning around $1.56 billion and KEMET earning $1.38 billion in the 12 months preceding September 2019. 

With customers spanning telecom and computer distributors, industrial manufacturers, automotive customers, and consumers, Yageo netted NTD$ 41.3 billion in sales (around $1.4 billion USD) in the 2019 fiscal year. 

 

Expanding Yageo’s Reach

One advantage of the merger focuses on the Multilayer Ceramic Chip Capacitor (MLCC) market. While Yageo leads in chip resistor sales, it still battles Murata, Samsung Electro, TDK Corp, and other players dominating the global MLCC market. 

MLCC production is key for Yageo’s revenue, as MLCCs and wireless/advanced components products tied as the company’s top-selling products in 2019, each claiming 32% of the company’s revenue, followed by chip resistors at 28%, protective products at 6% and thru-hole resistors at 2%.

The acquisition will also allow Yageo to expand its footprint in the American market. U.S. sales only account for 6% of the Yageo’s revenue, paling that of Greater China (48%), Asia (26%) and Europe (20%). 

Comparatively, the Americas are KEMET’s top growing market, with a 30% year-over-year increase in regional revenue. But the Asia-Pacific region still accounts for 39% of KEMET’s total revenue, followed by 24% from the Americas, 23% from Europe, the Middle East, and Africa, and 14% from Japan and Korea. 

KEMET’s strong Asia-Pacific presence will add a boost to Yageo’s sales growth in the region. 

 

A breakdown of KEMET’s FY 2019 revenue by region and product category. Image courtesy of KEMET.

 

When the acquisition was first announced in November 2019, Yageo CEO Pierre Chen commented in a news release that the deal is an opportunity to combine both companies’ product offerings and geographic coverage. 

“The integration will enhance our ability to serve customers in consumer electronics as well as in the high-end automotive, industrial, aerospace, telecom, and medical sectors,” Chen said.

 

A breakdown of Yageo’s 2019 sales by product and region. Image courtesy of Yageo.

 

The Yageo-KEMET merger is expected to be completed in the third quarter of this year, pending approval from the Investment Commission, Ministry of Economic Affairs in Taiwan. 

In a news release, KEMET noted that reviews typically take up to 90 days to complete. In late-April, the two parties announced regulatory approval from both the Committee on Foreign Investment in the United States and the Anti-Monopoly Bureau of the State Administration for Market Regulation in China. 

While the deal awaits approval from Taiwan’s regulators, KEMET has been busy releasing new product updates. The company recently introduced a new line of metal composite inductors, products of high demand in automotive systems that require high-efficiency power conversion at low power loss. KEMET also closed out 2019 with the launch of a new series of safety-certified ceramic surface mount capacitors designed to simplify the assembly process for mains powered production.