KMG Chemicals is purchasing OM Group's Ultra Pure Chemicals subsidiaries located in the United States, United Kingdom, Singapore and France. Last Monday, OM had announced the finalization of definitive agreements to sell the three subsidiaries in Singapore, the UK and the US as well as the one in France for a total US$60 million.
OM CEO Joe Scaminace had described the purchase by KMG as 'another step to optimize our portfolio and sharpen our strategic focus'. Should the sales push through, this would a clear example of exemplary deal making on the part of OMI.
Last 2012, the sales of 'ultra pure chemical solutions' worth US$94 million was reported. The chemicals are used in semi-conductor and microelectronics manufacturing.
The sale of these subsidiaries is at 0.64 times its annual sales, with an overall P/S ratio of just 0.47 times sales for OM. In the long run, the sale provides higher valuation than the company is well worth. For the part of KMG, it is purchasing subsidiaries below its current profit/sale ratio of 0.83.
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