Koch Industries to acquire Molex

Koch Industries Inc., the conglomerate owned by brothers Charles and David Koch, has agreed to acquire Molex Inc., a publicly traded maker of electronic components, for $7.2 billion. The acquisition is the second-biggest ever made by Koch, after its $21 billion deal for Georgia-Pacific,

the

New York Times’

DealBook column reported.

A

Wall Street Journal

report

noted that Molex, which generated about 14% of its $3.62 billion in revenue from sales to Apple in the fiscal year that ended June 30, has a margin that’s lower than those of larger competitors.

Members of Molex’s founding Krehbiel family and the management team, representing about 32% of the company’s common stock and 94% of its Class B shares, agreed to vote their holdings in favor of the deal, the

Times

article said. An analyst told the

Wall Street Journal

he estimated the Krehbiel family would receive $2.2 billion from the sale.

Molex was founded in 1938. It began by making moldable plastics and moved into plastic-covered plugs and components for appliances in the 1950s, the

Journal

article said.

The

Journal

report noted that Molex has had regulatory problems in recent years. Auditor Deloitte & Touche dropped the company as a client in 2004, saying that executives withheld information about an inventory expense; Molex replaced its CEO and CFO under pressure from the SEC over the matter. In 2006, Molex admitted misdating the timing of options and stock awards to its executives and asked the executives to return $685,000 in gains from the options. In 2010, Molex disclosed that a finance executive in Japan had used the company’s name to obtain loans of $175 million to fund unauthorized trading; this year Molec paid $21.2 million to settle a lawsuit related to the loans, the

Journal

article said.

Molex, based in Lisle, Ill., is expected to operate as an independent subsidiary of Koch, the

Times

article said. According to the

Journal

report, Koch plans to retain Molex’s management team. (Source: DealBook,

New York Times,

Sept. 9, 2013;

Wall Street Journal,

Sept. 10, 2013.)