3M Company (MMM) is all set to acquire the do-it-yourself (DIY) and professional business of GPI Group, a manufacturer and marketer of home improvement products such as tapes, hooks, insulation and floor protection products and accessories.
GPI Group has its headquarters in France. Though both companies have sealed the agreement, the terms of the deal have not been divulged. Subject to regular closing conditions, including regulatory approvals, the transaction is expected to close in the fourth quarter of 2011.
GPI serves multiple DIY needs of consumers in France and other European markets through its many branded products and solutions. Some renowned brands from GPI are its namesake GPI, Plasto and Dinac. The company has an employee strength of about 450 and generates its sales revenue from France and Western Europe.
3M’s core and complementary product offering for the construction and home improvement markets will stand to benefit from the addition of GPI’s products. 3M will be able to increase its penetration in the worldwide home improvement sector and will be better placed to provide superior service to its clients in France and Europe.
A strong cash flow position and continuously expanding sales revenue provide 3M ample resources to expand through acquisition and innovation of new products.
3M is globally recognized for its innovations, a point supported by some of its well-known brands such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard leading the market. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.
However, the company’s growth objectives are largely dependent on timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to the market at acceptable price points.
Further, the results have been impacted by worldwide economic and capital market conditions. Negative consumer sentiment is affecting the retail store traffic. On the corporate side, lower employment levels are negatively reducing office supply purchases in most companies.
3M Company together with its subsidiaries operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. It has more than 35 business units organized into six segments: Consumer and Office, Display and Graphics, Electro and Communications, Healthcare, Industrial and Transportation, Safety, Security and Protection Services Business.
The major competitors of 3M are Avery Dennison Corporation (AVY), EI DuPont de Nemours & Co. (DD) and Johnson & Johnson (JNJ).
We continue to maintain a Neutral rating on 3M Company for the long term. The company however has a Zacks #4 Rank (Sell recommendation) over the next one-to-three months.
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