. The deal, which gives the 3M division an equity value of $4.3 billion, won’t solve Chief Executive Mike Roman’s problem.
The Minnesota-based company will receive $1 billion and the way the deal’s structured means its shareholders will retain just over half of the combined company. This isn’t a terrible transaction: it values the 3M division at around 32 times EBITDA, higher than its own estimated 2022 multiple, according to research firm Gordon Haskett.The company’s stock price rose less than 1% on the news, a lacklustre response that is in keeping with recent years’ performance.
And yet a breakup of those disparate groups isn’t just unwieldy, it might even make the company less valuable. As Roman recently noted at a conference, technologies used in its electronics division are now being used for automobiles. So as the corporate world moves away from conglomerates, 3M remains stuck together like glue. Unfortunately, that means shareholders might come unstuck.- Industrial giant 3M said on Dec.
- The deal involves a reverse Morris Trust structure, a strategic way to divest a division tax-free. Under the terms of the deal, existing Neogen shareholders will own approximately 49.9% of the combined company, while 3M shareholders will own the rest.Register now for FREE unlimited access to reuters.comReuters Breakingviews is the world's leading source of agenda-setting financial insight.