KEMET acquires tantalum capacitor business from EPCOS

The definitive agreement for the sale was signed December 12, 2005. Closing is expected in spring of 2006, depending on the approval of the involved regulatory authorities. The sale includes the EPCOS plants in Évora, Portugal, and parts of the activities in Heidenheim, Germany, where conventional tantalum manganese oxide and tantalum polymer capacitors are manufactured. While KEMET will take on the employees of the Évora plant, it does not plan to continue manufacturing tantalum capacitors in Heidenheim. KEMET also intends to take on EPCOS employees in development, marketing and sales of tantalum capacitors. KEMET's objective is to integrate and successfully continue EPCOS' tantalum capacitor business as quickly and smoothly as possible. In order to provide a continued supply of product to customers during the transition, a Manufacturing and Supply Agreement was also agreed to where EPCOS will continue to produce product in Heidenheim and sell to KEMET until later in 2006. At that time the equipment will be sold to KEMET. The selling price is EUR 86.5 million. EUR 78.5 million will be paid at closing and the remaining EUR 8 million when the Manufacturing and Supply Agreement expires. EPCOS expects a cash inflow of approximately EUR 70 million from the sale. Early on offers by various parties and discussions in the context of the sales talks resulted in a valuation of the tantalum business which necessitated an impairment write-down of EUR 46 million in Q4 2005. Business with standard products such as tantalum capacitors in recent years has suffered from overcapacities and high pressure on prices. EPCOS has endured losses for several years with these capacitors. Recently, EPCOS was no longer able to follow the price development for tantalum manganese oxide capacitors. Furthermore, its entry into the new tantalum polymer business did not succeed as quickly as planned. Turning this business around on its own would have been time-consuming, expensive and finally questionable because EPCOS still would not have attained a leading position in this market. “With the sale of our Tantalum Capacitor Business Unit we have eliminated the company's largest source of losses,” stated Gerhard Pegam, President and CEO of EPCOS. “Moreover, we are convinced that KEMET will be able to lead our tantalum capacitor business into a bright future.” EPCOS is focusing more on specific market segments and streamlining its remaining portfolio of standard products. Applications in the automotive electronics, industrial electronics and telecommunications industries are moving more and more into the foreground, where EPCOS can provide its customers with special products and solutions.