Molex (Nasdaq: MOLX) Stock Gains 31% on Deal; Here's Why Koch Wants It

Email

The name might not be that familiar, and the industries seem snooze-worthy, but this sizeable deal is stirring up plenty of chatter…

Koch Industries, one of the largest private companies in the United States, announced Monday it will buy electronic components manufacturer Molex Inc. (Nasdaq: MOLX) for $7.2 billion.

Under the terms of the deal, Koch will pay $38.50 per share in cash, a roughly 31% premium to Friday's closing price of Molex's common stock.

That values MOLX at 1.9 times revenue and 11.2 times earnings before interest, taxes, depreciation, and amortization (EBITDA), according to Bloomberg. That's more than twice the median price paid in comparable deals, reported Bloomberg, which was 0.8 times revenue and about 8.5 times EBITDA.

So, who is Molex and why are they worth $7 billion?

Why Molex (Nasdaq: MOLX) Is a Big Deal

For 75 years, Molex has manufactured electrical and fiber optic systems for things that run the gamut from connectors to sockets to antennas to switches used in cars to computers to cell phones. It started as a moldable plastic manufacturer in 1938.

Meanwhile, Wichita, KS-based Koch Industries, a multifaceted multinational company owned by the politically involved billionaire brothers Charles and David Koch, is predominately focused on businesses engaged in biofuels, oil refining, paper, pulp, chemicals, fertilizers, and packaging.

Koch said the acquisition provides a significant new platform for growth.

"Molex has become a global leader by focusing on product innovation and value creation, driven by its talented leadership and employees," Chief Executive Officer and Chairman Charles Koch said in a statement. "We look forward to jointly applying the capabilities of our two companies to help take both to the next level."

And how is Molex the key to a "new platform for growth" and the "next level"?

Apple Inc. (Nasdaq: AAPL).

MOLX and AAPL

Apple purchases connecters for its blockbuster-selling mobile devices from Molex. Sales to Apple accounted for some 14% of Molex's total revenue of $3.62 billion in the fiscal year ended June 30.

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK