Quarterly report pursuant to Section 13 or 15(d)

Acquisitions (Notes)

v3.19.2
Acquisitions (Notes)
3 Months Ended
Jun. 30, 2019
Acquisitions [Abstract]  
Business Combination Disclosure [Text Block] <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Acquisitions</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Sale of Electro-Mechanical Business and Acquisition of Remaining Interest in TOKIN</font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Between February 1, 2013 and April 19, 2017, KEMET, through its wholly-owned subsidiary, KEMET Electronics Corporation (&#8220;KEC&#8221;), held a </font><font style="font-family:inherit;font-size:10pt;">34%</font><font style="font-family:inherit;font-size:10pt;"> economic interest in TOKIN Corporation (&#8220;TOKIN&#8221;) pursuant to a Stock Purchase Agreement (the &#8220;Stock Purchase Agreement&#8221;) by and among KEC, TOKIN and NEC Corporation (&#8220;NEC&#8221;), as calculated based on the number of common shares held by KEC, directly and indirectly, in proportion to the aggregate number of common and preferred shares of TOKIN outstanding as of such date. TOKIN was established in Japan in 1938 and is engaged in production and distribution of tantalum capacitors, transmitting communication devices, magnetic devices, piezoelectric devices and sensors. TOKIN has </font><font style="font-family:inherit;font-size:10pt;">six</font><font style="font-family:inherit;font-size:10pt;"> manufacturing locations throughout Asia and was previously operating as a joint venture with NEC. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On April 14, 2017, TOKIN closed on the sale of its electro-mechanical devices (&#8220;EMD&#8221;) business to NTJ Holdings 1 Ltd. (&#8220;NTJ&#8221;), a special purpose entity that is owned by funds managed or operated by Japan Industrial Partners, Inc. (&#8220;JIP&#8221;), pursuant to a master sale and purchase agreement (the &#8220;EMD Master Sale and Purchase Agreement&#8221;) previously entered into between TOKIN, NTJ and JIP (&#8220;Sale of EMD&#8221;). The initial selling price for EMD was </font><font style="font-family:inherit;font-size:10pt;">JPY 48.2 billion</font><font style="font-family:inherit;font-size:10pt;">, or approximately </font><font style="font-family:inherit;font-size:10pt;">$431.0 million</font><font style="font-family:inherit;font-size:10pt;">, using the March 31, 2017 exchange rate of </font><font style="font-family:inherit;font-size:10pt;">111.823</font><font style="font-family:inherit;font-size:10pt;"> Japanese Yen (&#8220;JPY&#8221;) to 1.00 U.S. Dollar (&#8220;USD&#8221;), and was subject to certain working capital adjustments. In the third quarter of fiscal year 2018, the selling price was adjusted by </font><font style="font-family:inherit;font-size:10pt;">JPY 1.1 billion</font><font style="font-family:inherit;font-size:10pt;"> or approximately </font><font style="font-family:inherit;font-size:10pt;">$10.1 million</font><font style="font-family:inherit;font-size:10pt;"> (using the December 31, 2017 exchange rate of </font><font style="font-family:inherit;font-size:10pt;">112.574</font><font style="font-family:inherit;font-size:10pt;"> Japanese Yen to 1.00 U.S. Dollar) related to working capital and other adjustments in accordance with the EMD Master Sale and Purchase Agreement. At the closing of the Sale of EMD, TOKIN used a portion of the sale proceeds to repay debt related to a shareholder loan from NEC. The TOKIN historical balance sheet was adjusted to reflect the removal of net assets sold and other items directly impacted by the Sale of EMD. Additionally, due to KEMET&#8217;s </font><font style="font-family:inherit;font-size:10pt;">34%</font><font style="font-family:inherit;font-size:10pt;"> equity interest in TOKIN held as of the closing, adjustments were made to reflect KEMET&#8217;s accounting for the Sale of EMD in accordance with the equity method of accounting.</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On April 19, 2017, pursuant to a stock purchase agreement (the &#8220;TOKIN Purchase Agreement&#8221;) dated February 23, 2017 between KEC and NEC, KEC completed its acquisition, subject to final purchase price adjustments, of the remaining </font><font style="font-family:inherit;font-size:10pt;">66%</font><font style="font-family:inherit;font-size:10pt;"> economic interest in TOKIN, and as a result, TOKIN became a </font><font style="font-family:inherit;font-size:10pt;">100%</font><font style="font-family:inherit;font-size:10pt;"> owned indirect subsidiary of KEMET (the &#8220;TOKIN Acquisition&#8221;). Under the terms of the TOKIN Purchase Agreement, KEC paid NEC </font><font style="font-family:inherit;font-size:10pt;">JPY 16.2 billion</font><font style="font-family:inherit;font-size:10pt;">, or approximately </font><font style="font-family:inherit;font-size:10pt;">$148.6 million</font><font style="font-family:inherit;font-size:10pt;"> (using the April 19, 2017 exchange rate of </font><font style="font-family:inherit;font-size:10pt;">109.007</font><font style="font-family:inherit;font-size:10pt;"> Japanese Yen to 1.00 U.S. Dollar), for all of the outstanding shares of TOKIN it did not already own. The preliminary purchase price was comprised of </font><font style="font-family:inherit;font-size:10pt;">JPY 6.0 billion</font><font style="font-family:inherit;font-size:10pt;">, or approximately </font><font style="font-family:inherit;font-size:10pt;">$55.0 million</font><font style="font-family:inherit;font-size:10pt;"> (using the April 19, 2017 exchange rate of </font><font style="font-family:inherit;font-size:10pt;">109.007</font><font style="font-family:inherit;font-size:10pt;"> Japanese Yen to 1.00 U.S. Dollar) plus </font><font style="font-family:inherit;font-size:10pt;">JPY 10.2 billion</font><font style="font-family:inherit;font-size:10pt;">, or approximately </font><font style="font-family:inherit;font-size:10pt;">$93.6 million</font><font style="font-family:inherit;font-size:10pt;">, which represented one-half of the estimated excess net cash proceeds (&#8220;Excess Cash&#8221;) from the Sale of EMD. The acquisition price was subject to working capital adjustments pursuant to the EMD Master Sale and Purchase Agreement. As a result of these working capital adjustments, the acquisition price was increased by </font><font style="font-family:inherit;font-size:10pt;">JPY 0.3 billion</font><font style="font-family:inherit;font-size:10pt;">, or approximately </font><font style="font-family:inherit;font-size:10pt;">$3.0 million</font><font style="font-family:inherit;font-size:10pt;"> (using the September 30, 2017 exchange rate of </font><font style="font-family:inherit;font-size:10pt;">112.502</font><font style="font-family:inherit;font-size:10pt;"> Japanese Yen to 1.00 U.S. Dollar) in the second quarter of fiscal year 2018. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company believes the acquisition of TOKIN expands KEMET&#8217;s geographic presence, combining KEMET&#8217;s presence in the western hemisphere and TOKIN&#8217;s excellent position in Asia to enhance customer reach and creates an entrance into Japan for KEMET. The Company believes TOKIN&#8217;s product portfolio is a strong complement to KEMET&#8217;s existing product portfolio. KEMET believes the combination creates a leader in the combined polymer and tantalum capacitors market. The acquisition also enhances KEMET&#8217;s product diversification with entry into Electro-Magnetic Compatible ("EMC") devices, as well as sensors and actuators. With the increased scale, the Company anticipates optimizing costs through competitive raw materials sourcing and maximizing operating efficiencies. Consistent with expectations, the acquisition has been accretive to earnings with improvement in Net income, Adjusted EBITDA and cash flows. TOKIN&#8217;s tantalum capacitor business is included within KEMET&#8217;s Solid Capacitor segment (&#8220;Solid Capacitors&#8221;) and the remainder of TOKIN&#8217;s business formed a new reportable segment for KEMET in fiscal year 2018, Electro-Magnetic, Sensors, and Actuators (&#8220;MSA&#8221;).</font></div></div>