Cabot Microelectronics has agreed to buy KMG Chemicals for around $1.6 billion, boosting its position in the semiconductor industry.

The deal adds KMG’s high-purity chemicals to Cabot’s polishing slurries and pads that are used to make computer chips, virtually doubling Cabot’s revenue to roughly $1 billion and generating a combined EBITDA of around $320 million.

Commenting on the acquisition, Cabot’s president and CEO David Li, said: “KMG’s industry leading electronic materials business is highly complementary to our CMP product portfolio, while its performance materials business broadens our product offerings into the fast-growing industry for pipeline performance products and services.”

Under the terms of the agreement, KMG shareholders will be entitled to receive $55.65 in cash per KMG share and 0.20 of a share of Cabot Microelectronics common stock, representing an implied value per share of $79.50.

However, Michael Harrison, an analyst at US investment bank Seaport Global Securities, told Bloomberg news agency that he was “disappointed” in the purchase price and another bidder might emerge. Harrison has a price target of $85 for KMG.

According to Bloomberg, electronic materials will generate about 82% of revenue from the combined company, with 12% from chemicals used by pipeline operators and 6% from wood treatments and other products.

The transaction, which remains subject to the usual closing conditions including regulatory clearance and approval by KMG shareholders, is expected to close near the end of 2018.

Cabot expects to achieve $25 million of annual run-rate cost synergies within the first two years after the deal is finalized.

KMG is based in Fort Worth, Texas, and has 750 full-time employees at 19 sites across North America, Europe and Asia. It took its first step into the electronics sector in January 2008 when it purchased the high-purity chemicals business from Air Products.

In 2010, KMG bought the electronic chemicals assets from General Chemical, followed three years later by the acquisition of the OMG Group’s Ultra Pure Chemicals business. In 2016, KMG acquired Singapore-based Nagase FineChem, strengthening its presence in the Asian market.