KMG Chemicals, Inc. (NYSE: KMG) Investor Lawsuit Against Takeover Filed

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Company Name(s): 
KMG Chemicals
Case Name: 
KMG Chemicals Deal Case
Case Status: 
Lawsuit Filed
Affected Securities
NYSE: KMG
Summary: 

An investor, who currently holds shares of KMG Chemicals, Inc. (NYSE: KMG), filed a lawsuit against the takeover of KMG Chemicals, Inc.

The plaintiff alleges that the defendants breached their fiduciary duties owed to NYSE: KMG stockholders by agreeing to sell KMG Chemicals, Inc. cheaply via an unfair process.

On August 15, 2018, Cabot Microelectronics Corporation (Nasdaq: CCMP) and KMG Chemicals, Inc. (NYSE: KMG) have entered into an agreement under which Cabot Microelectronics will acquire KMG in a cash and stock transaction with a total enterprise value of approximately $1.6 billion. Under the terms of the agreement, KMG shareholders will be entitled to receive, per KMG share, $55.65 in cash and 0.2000 of a share of Cabot Microelectronics common stock, which represents an implied per share value of $79.50 based on the volume weighted average closing price of Cabot Microelectronics common stock over the 20-day trading period ended on August 13, 2018.

However, plaintiff claims that the proposed consideration NYSE: KMG shareholders will receive is grossly inadequate and undervalues KMG Chemicals, Inc. Indeed, at least one analyst has set the high target price at $81.00 per share. KMG Chemicals, Inc. reported that its Total Revenue rose from $333.44 million for the 12 months period that ended on July 31, 2017 to $465.55 million for the 12 months period that ended on July 31, 2018 and that its Net Income increased over those time periods from $23.63 million to $64.84 million. In addition, the plaintiff alleges that the process is also unfair NYSE: KMG stockholders

On October 24, 2018, NYSE: KMG shares closed at $
per share.

the investigation concerns whether the offer is unfair to KMG Chemicals, Inc. (NYSE: KMG stockholders. More specifically, the investigation concerns whether the KMG Chemicals, Inc. (NYSE: KMG Board of Directors undertook an adequate sales process, adequately shopped the company before entering into the transaction, maximized shareholder value by negotiating the best price, and acted in the shareholders' best interests in connection with the proposed sale.