By MARY PATRICK
Koch Industries announced the purchase this week of Molex, the maker of electronic connectors that partners with many companies, including Apple.
The $7.2 billion deal is one of the biggest ever by the privately-held company. They will buy out shareholders and take the company private, which will immediately eliminate one of Molex’s biggest expenses: $150 million paid annually as a dividend to shareholders.
“As a public company Molex had a lot of pressure to pay out a big dividend,” Steve Feilmeir, Koch’s chief financial officer, told Forbes. “We believe we can grow the business with our focus on capturing more opportunities as opposed to being limited by whatever capital is left over after the dividend.”
Koch will pay Molex shareholders $38.50 per share.
Based in Illinois, Molex was founded in 1938 as a company that produced a coal-based plastic called Molex, according to Forbes. The company eventually moved away from making plastic products and into electrical sensors and eventually high-speed data connections.
Now with 38,000 employees, the company makes about 19% of its revenue from the automotive industry – including the sensors used in crash-avoidance systems – and 21% from mobile devices.
Frederick and John Krehbiel, the grandsons of the company founder, said selling the 75-year-old company came only after careful consideration of the deal.
“Our board of directors and our family believe that this transaction, which follows a diligent and thorough review process by the board, provides outstanding benefits for all our stakeholders,” Fred Krehbiel said in a statement. “The transaction is expected to provide substantial opportunities for our worldwide employees, many of whom have spent much of their working lives at Molex and are responsible for the company’s long-term success.”
The two brothers leave the deal with about $2 billion in cash for themselves and family trusts, according to Forbes.
The deal is the second-biggest ever for Koch. The largest is the 2005 purchase of Georgia-Pacific for $21 billion, according to the New York Times.
Koch is expected to bring its Market-Based Management system to Molex. In the past, some executives with purchased companies have had difficulty making the transition to the Koch method of management.
Molex will remain a independent subsidiary of Koch, according to Feilmeir.
