Diversified conglomerate 3M Company MMM recently announced an agreement to acquire Capital Safety – leader in fall protection equipment and services from KKR- a private equity firm for $2.5 billion (including debt and net of cash acquired). The transaction is expected to be funded through cash and close in the third quarter of 2015.
The strategic move by 3M is to strengthen its Personal Safety business, which currently provides respiratory and hearing protection solutions for workers. Capital Safety supplies fall protection equipment under the global brands DBI-SALA and PROTECTA. 3M is focusing on expanding its presence in the personal safety industry, which is witnessing increasing growth in emerging markets as worker-protection regulations increase and multinational companies continue to expand.
Post completion, the transaction is expected to be dilutive to 3M’s earnings by 4 cents per share in the first 12 months. Excluding one-time items the transaction is expected to be accretive to earnings by 12 cents per share over the same period. 3M will be able to build on Capital Safety's existing range and customer case by utilizing its technological strength and strong global network. 3M's diversified product portfolio and the ability to penetrate in different markets is likely to augment its revenues in the long term.
Together with its subsidiaries, 3M operates as a diversified technology company with manufacturing operations spread over 70 countries. The company delivers innovative security solutions to businesses and governments worldwide, thus ensuring the security of people and documents. 3M also pursues dynamic growth opportunities in a broad range of sectors on the back of its flexible product lines and hence, has been expanding its global footprint continually.
3M currently has a Zacks Rank #4 (Sell). Better-ranked stocks from the same space include Rollins Inc. ROL, Hitachi Ltd. HTHIY and Shanghai Industrial Holdings Limited SGHIY. Each of these stocks hold a Zacks Rank #2 (Buy).
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