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Cemtrex presses bid to acquire much larger Key Tronic Corp.

Saagar Govil, chief executive of Farmingdale-based Cemtrex.

Saagar Govil, chief executive of Farmingdale-based Cemtrex. Photo Credit: Heather Walsh

Cemtrex Inc., a Farmingdale provider of electronics design and production services and pollution control systems, is continuing to press its bid for Key Tronic Corp., a company with a market capitalization more than twice as large as its would-be acquirer.

In a presentation Thursday at the Microcap Conference in Manhattan, Cemtrex chairman, president and chief executive Saagar Govil said investors should look beyond the relative stock prices of the companies.

In September, Cemtrex extended an offer to trade one share of its stock, which closed Thursday at $3.02, up 6 percent, for each share of Key Tronic, which finished at $6.94, down 0.9 percent.

“Cemtrex right now is a $3 stock,” Govil said. “Key Tronic is a $7 stock. We think together they could be a $15 or $20 stock.” He said a formal bid would be unveiled in “a few months” after consultation with the Securities and Exchange Commission.

But independent research firm SeeThruEquity said in a note released Thursday that the bid “seems more likely to highlight that Cemtrex is undervalued than to complete the acquisition.”

In September, Key Tronic, based in Spokane Valley, Washington, issued a statement responding to the offer by Cemtrex, saying that it had “extremely serious concerns” about the “motives” of the Long Island company “as well as the legitimacy of the purported offer.”

Govil said that combining with Key Tronic, a provider of electronics manufacturing services, is appealing because the trend toward automation, robotics and interconnected smart devices means the “density of electronics . . . is going up exponentially.” Also attractive, he said, is Key Tronic’s manufacturing presence in the United States, Mexico and China, areas that complement the strength of Cemtrex in Europe.

“We have to establish a global footprint for our manufacturing,” he said.

As of July 2016, Key Tronic reported having 4,947 employees, while Cemtrex said it had 577 full-time employees in December 2016. The market capitalization of Cemtrex is about $30 million compared with roughly $75 million for Key Tronic.

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