3M Co. (MMM) to Acquire Polypore's (PPO) Separations Media Unit in $1B Deal

3M Co. (NYSE: MMM) has entered into a definitive agreement with Polypore International Inc. (NYSE: PPO) to acquire the assets and liabilities associated with Polypore’s Separations Media business for a total purchase price of $1.0 billion. Polypore’s Separations Media business is a leading provider of microporous membranes and modules for filtration in the life sciences, industrial and specialty segments with trailing 12-month sales of $210 million as of Sept. 27, 2014.

Separately, Asahi Kasei has announced today that it has entered into a definitive merger agreement to acquire Polypore’s Energy Storage business. Both transactions are subject to regulatory approvals and customary closing conditions. In addition, both transactions are conditioned on 3M’s transaction with Polypore closing immediately prior to the closing of Asahi Kasei’s transaction with Polypore.

Filtration is a priority technology platform for 3M. Customers increasingly require higher performance “ultra” filtration that membrane technology delivers, particularly in life sciences and biopharmaceutical segments. The addition of Polypore’s Separations Media business will add new technology capabilities to complement 3M’s existing filtration business in life sciences, industrial, water treatment, electronics and foodservice.

“Polypore’s Separations Media business is an outstanding business that will expand our opportunities in many large and attractive segments,” said Inge G. Thulin, 3M chairman, president and chief executive officer. “The acquisition of this ultrafiltration membrane technology will enhance 3M’s core filtration platform and help generate new growth opportunities across the company.”

3M’s Purification business, part of 3M’s Industrial Business Group, is a leader in residential water, commercial foodservice, industrial and life science filtration. Adding Polypore’s Separations Media business will build on 3M’s fundamental strengths in technology, manufacturing, global capabilities, and brand.

“The combination of 3M and Polypore’s Separations Media business will help us to meet customers’ emerging needs for high-value filtration solutions,” said Michael F. Roman, executive vice president, 3M Industrial Business Group. “Together, we will be able to offer a broader array of products to both Polypore’s and 3M’s customers, which will accelerate the global growth of our membrane business.”

On a GAAP reported basis, 3M estimates the acquisition to be $0.03 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be $0.04 accretive to earnings over the same period.

3M will finance the transaction with cash, the majority of which will come from outside the U.S.

The transaction will be structured to deliver to 3M a full step-up in the tax basis of the acquired assets. Taking into account 3M's estimate of the present value of this tax step-up, the effective purchase price multiple is approximately 12 times annual adjusted EBITDA for the 12 months ended Sept. 27, 2014.

Centerview Partners LLC acted as financial advisor to 3M.

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