3M (MMM, Financial) announced on Aug. 26 that it has completed the acquisition of Separations Media for $1 billion. The acquisition of Separations Media from Polypore International, Inc. (PPO, Financial) is occurring simultaneously with the acquisition of Polypore’s Energy Storage business by Asahi Kasei. The Energy Storage business comprised the remainder of Polypore International. Thus upon completion of both acquisitions Polypore International’s shares will be completely dissolved and the company will no longer operate as a single entity.
Separations Media is a lucrative acquisition for 3M because of the value it adds to 3M’s filtration industrials business. Separations Media manufactures microporous membranes and modules used for filtration primarily in the industrial and life sciences sectors. In Separations Media’s fiscal year 2014, it reported net sales of $208.4 million, an increase of 7.4% from the previous year. As of Aug. 26 the Separations Media business will begin to be fully integrated within 3M’s Industrial business segment.
3M’s Industrials business accounts for approximately 34% of 3M’s sales revenue. In the second quarter of 2015 the firm reported Industrial segment revenue of $2.6 billion and for the first half of the year the firm had $5.3 billion in revenue from its Industrial business. Filtration is a key product segment for 3M in the Industrial business and Separations Media brings a new portfolio of technologically advanced products to 3M, complementing 3M’s existing products in the filtration space. The new technologies that Separations Media brings will add to 3M’s breadth of product offerings. It will also help to increase sales revenue in 3M’s Industrial segment which overall has shown a slight decline in recent quarters. For the third quarter Industrial sales were down 6% from the comparable quarter and for the first half of 2015 Industrial sales were down 5%.
Other business segments for 3M include Safety and Graphics, Electronics and Energy, Health Care and Consumer. Excluding the Industrial business segment, the remaining business segments combined for total revenue of $10.0 billion in the first half of 2015. The acquisition of Separations Media is 3M’s third acquisition for the year. In 2015 3M also acquired Ivera Medical Corporation and Capital Safety. Ivera Medical Corporation provides vascular access technology solutions and will contribute to 3M’s Health Care business segment. Capital Safety provides protection equipment products and will contribute to the firm’s Safety and Graphics business.
In the day following the acquisition completion announcement 3M’s stock price gained 3.52% to close at $142.72. 3M has reported that the acquisition of Separations Media will add $0.04 to adjusted earnings per share over the next 12 months. The Separations Media acquisition is also expected to add considerable synergies and cost savings within 3M’s filtration business.
Currently analysts have a full year 2015 revenue estimate of $30.82 billion for 3M with an earnings per share estimate of $7.83. Given positive results from the acquisition integrations 3M will likely exceed the market’s revenue estimate for the second half of the year and begin to realize the added earnings value in the first half of 2016. For investors seeking long-term appreciation from large-cap industrial stocks the incremental added value in the near-term from the three current acquisitions makes 3M attractive at its current price of $143.90.
