Global Processing

KMG Sees Profit Boost From Acquisition

January 8, 2008
KMG Chemicals Inc. said recently that its acquisition of Air Products and Chemicals Inc.''s high-purity process chemicals business will contribute more to earnings in fiscal 2009 than this year.

According to the Associated Press, KMG said the $70.3 million purchase, which it has now completed, will add to earnings this year, but hinder profit growth due to integration costs. Chief Executive Neal Butler said KMG is "on track" to post $135 million in revenue this year, compared with $89.8 million in fiscal 2007. He expects revenue to leap over $180 million in 2009.

The Air Products unit had about $90 million in revenue during the year ended Sept. 30. It supplies semiconductor manufacturers of high-purity process chemicals used to clean, etch and otherwise prepare the surface of semiconductor products.

It is the largest supplier in the U.S. and third-largest supplier in Europe, with 40 percent and 20 percent market share, respectively. The business will operate as KMG Electronics Chemicals in the U.S. and Italia Srl in Europe.

The purchase price includes $47.1 million for plant, property, equipment and intangible assets, as well as $23.2 million for accounts receivable, inventory and accrued liabilities. The acquisition includes a production facility and warehouse in Pueblo, Colo., and a manufacturing facility and warehouse near Milan, Italy.

KMG financed the transaction with cash on hand and about $56 million of incremental senior debt, most of which it expects to pay off by the end of its fiscal year July 31.