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3M Set to Acquire Ceradyne

Zacks Equity Research

3M Company (MMM) recently announced its intention of acquiring Ceradyne Inc. (CRDN), a global leader in the development and production of advanced technical ceramics, for $35 a share. The transaction is estimated at $860 million or $670 million net of cash, cash equivalents, short-term investments and debt.

As per the terms of the agreement, a subsidiary of 3M is expected to initiate a tender offer for the purchase of all outstanding shares of Ceradyne within a period of 10 days. The offer will be subject to the tender of a majority of Ceradyne’s shares and other regulatory closing conditions. The deal is expected to be completed by the end of this year.

With the acquisition of Ceradyne, 3M is expected to develop new technologies and innovation for specifically designed materials requiring advanced ceramics. Post acquisition, Ceradyne will be integrated into the Energy and Advanced Materials division.

3M expects the transaction to be accretive to its earnings by one cent in the very first year, on pro forma basis. On a GAAP basis, the acquisition is expected to be accretive to earnings by 5 cents.

Based in Costa Mesa, California and with operations in the U.S., Canada, China and Germany, Ceradyne reported annual revenue of approximately $500 million. The company is a global leader in the development and production of advanced technical ceramics for demanding applications in the automotive, oil and gas, solar, industrial, electronics and defense industries. Therefore, this acquisition is a strategic fit with 3M’s existing transportation, energy markets and defense businesses.  

The 3M brand is recognized around the world. Household names like Nexcare, Post-it, Scotch, Scotch-Brite and Scotchgard are market leaders. The company remains focused on new product development, with its scientists and innovators enjoying an important competitive advantage worldwide. The company currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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