3M Co (NYSE:MMM) has settled a merger deal with Capital Safety worth $1.8 billion in an attempt to expand its personal safety equipment portfolio for which the firm thinks would be an important growth business in future. The firm is making acquisitions on planned basis to stabilize its revenue growth. 3M usually lay its hands on smaller firms well below $1 billion, but now the firm focuses on big acquisitions.
3M operates in five segments providing services to industrial, Safety and Graphics, Electronics and Energy, Health Care and Consumer markets. The company’s products range from Scotch tape and Post-it Notes to materials used for making batteries, microchips and flat screens.
3M also assumes nearly $700,000 in debt. The firm expects from the Capital Safety to increase its earnings margin by four cents in the first year following the closure of the deal. Further if excluding the acquisition related costs, the procurement should add 12 cents a share in the same period.
Capital Safety specializes in fall-protection equipment, harnesses, self-retracting lifelines and other products, under the brands Protecta and Dbi-Sala. The firm controls the global fall-protection equipment market.
Capital Safety reported revenue, excluding acquisition costs excluding acquisition costs, of $430 million for the last fiscal year ended March 31, posting a mix annual sales growth rate of 10% over the past four years.
3M Chief Executive Inge Thulin called the personal safety segment a “large and strategically important growth business.” 3M is already manufacturing products for personal safety that includes protective eyewear, face masks and ear plugs, among other items. The company said demand for those types of products is rising, driven by increased focus of regulators on worker safety.
KKR bought Capital Safety in late 2011 for $1.12 billion from another private-equity firm. Since then Capital Safety has acquired some firms of its own to enhance its operations in addition to increasing its exposure in market. The transaction of Capital Safety is expected to close in the third quarter.
