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3M expands medical-products unit in record US$4.3b deal
[NEW YORK] 3M Co agreed to buy medical-products maker Acelity Inc for about US$4.3b, its biggest acquisition ever, as new Chief Executive Officer Mike Roman takes a more aggressive approach to expanding the beleaguered company.
The purchase, from a group of funds advised by Apax Partners, adds bandages and surgical-wound products to one of 3M's most profitable businesses. The company valued the transaction at US$6.7 billion including Acelity's debt, which was US$2.4 billion on Dec 31.
"Health care for us has been a strong growth marketplace and portfolio, so we've been investing in a broader range of technologies," Mr Roman said Thursday on a conference call with investors. "Advanced wound care has been one of our priority growth platforms."
The maker of Post-it notes and touchscreen displays is turning to acquisitions as struggles in markets such as automotive and electronics crimp the company's growth prospects. 3M suffered its worst single-day stock decline in 31 years last week after revealing weakness across its business lines, announcing 2,000 job reductions and cutting its forecast for organic growth to as little as minus 1 per cent.
The blockbuster deal tops the 2015 purchase of Capital Safety for US$2.5 billion as 3M's biggest, reflecting a greater willingness to consider transformational moves under former CEO Inge Thulin. The company also bought Scott Safety in 2017 for US$2 billion. Mr Roman, who took the helm last year, told investors last week that "we continue to stay active looking at acquisitions."
3M fell was little changed at US$185.80 at 10.29 am in New York. The shares had declined 2.3 per cent this year through Wednesday, while the Dow Jones Industrials Average climbed 13 per cent.
The deal marks a change of course for Acelity. Apax, along with the Canada Pension Plan Investment Board and PSP Investments, had been speaking with advisers about a potential initial public offering of the San Antonio, Texas-based company, Bloomberg reported in December.
3M's purchase is spurring the manufacturer to scale back share repurchases to conserve cash. The company will cut buybacks to between US$1 billion and US$1.5 billion this year from a previous expectation of as much as US$4 billion, according to a statement.