KMG Chemicals Announces Acquisition of Rabon Product Line Assets

Expected to Add $4 Million in Annualized Revenue and be Immediately Accretive to Earnings


HOUSTON, Jan. 2, 2003 (PRIMEZONE) -- KMG Chemicals, Inc. (Nasdaq:KMGB), a global provider of specialty chemicals in carefully focused markets, today announced its acquisition of the Rabon insecticidal product lines of Boehringer Ingelheim Vetmedica, Inc. Boehringer Ingelheim Vetmedica, Inc. is an affiliate of the Boehringer Ingelheim group of companies headquartered in Ingelheim, Germany. The acquisition is effective as of December 30, 2002.

The Rabon product lines are used by domestic livestock and poultry growers to protect animals from flies and other pests. With this acquisition, KMG will offer the market a portfolio of oral larvicides, insecticidal powders and sprays, all containing the active ingredient tetrachlorvinphos. Rabon Oral Larvicide is the leading oral larvicide product in the United States.

As part of the transaction, KMG has also acquired the product registration for Ravap(r) Insecticide Spray. Both KMG and Boehringer Ingelheim Vetmedica will produce and market this spray composed of Rabon and other ingredients. Boehringer Ingelheim Vetmedica will continue to market the product under its Ravap(r) trademark. Other assets acquired in the transaction include equipment, certain inventory, product registrations for other Rabon products, and other intangible assets.

David Hatcher, chairman and president of KMG, said, "This is our second step forward into the agricultural chemicals sector, and it further diversifies our overall revenue stream. We are excited about expanding our company with the Rabon product line, and with the potential for future growth this acquisition offers. Unlike other products in our portfolio, this product offers the opportunity for some organic growth. We will be actively looking for partnerships to expand the growth of the Rabon product lines both domestically and internationally. We intend to be the major supplier to the oral larvicide market worldwide."

Management anticipates that the acquisition should add approximately $4 million in annualized revenues, and that it should be immediately accretive to earnings. The purchase is being financed with a senior credit facility from KMG's long-time banking partner, SouthTrust Bank of Birmingham, Alabama.

"KMG has sufficient financial capacity to close more acquisitions using senior debt while still maintaining a conservative balance sheet," continued Hatcher. "Due to current economic conditions we are seeing more attractively priced acquisition prospects than we have seen in several years. Because of this, we are investigating financing alternatives in anticipation of the time when we have appropriately leveraged our balance sheet with senior debt. We are continuing ahead with our growth strategy that has served us well -- targeting attractive acquisitions that meet our criteria of being immediately accretive financially and which serve narrowly focused markets. Our discipline, patience, and conservative approach to the acquisitions process is paying off. We have never subscribed to the fantasy of large 'synergies' through acquisitions. While our approach has been out of favor for several years, our patience now has the potential to be rewarded, to the benefit of our shareholders."

KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to carefully focused markets. The company grows by acquiring and managing stable chemical product lines and businesses. Its wholly owned subsidiary, KMG Bernuth, Inc. is a global provider of products to the lumber treating and agricultural industries. For more information, visit the company's web site at www.kmgchemicals.com.

The Boehringer Ingelheim group of companies, headquartered in Ingelheim, Germany, is one of the 20 leading pharmaceutical corporations in the world. It has some 140 affiliated companies in 42 countries worldwide and focuses on human pharmaceuticals and animal health. For more information see www.boehringer-ingelheim.com.

The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.


            

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