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3M's Ceradyne Acquisition

Zacks Equity Research

3M Company’s (MMM) direct wholly owned subsidiary, Cyborg Acquisition Corporation recently started the tender offer priced at $35.00 per share for all outstanding shares of common stock of Ceradyne, Inc. (CRDN). The agreement to merge was initially announced by 3M and Ceradyne on October 1, 2012.   

The price offered for the shares has been accepted by the board of directors of Ceradyne with alacrity, who consider the price to be fair and acceptable to the shareholders. Ceradyne advised its shareholders to accept the offer and tender their shares. The tender offer is due to expire at 5:00 p.m., New York City time, on Tuesday, November 27, 2012. The date maybe extended.

The Offer to Purchase, Letter of Transmittal and other related materials contain the complete terms and conditions of the tender offer and filing of the same will be done by 3M and Cyborg Acquisition Corporation with the SEC on October 15, 2012. Ceradyne will also file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC relating to the offer.

The transaction is expected to close in the fourth quarter of 2012. Following the completion of the acquisition, Ceradyne will join the 3M Energy and Advanced Materials Division within 3M’s Industrial and Transportation Business. The division is engaged in providing valued materials for lightweight solutions and materials for performance in difficult conditions to customers in different industries.

Based in Costa Mesa, Calif., Ceradyne, is a leader in development and production of advanced technical ceramics for demanding applications in the automotive, oil and gas, solar, industrial, electronics and defense industries. The company operates in the U.S., Canada, China and Germany. Ceradyne’s annual revenue amounts to approximately $500 million.

3M expects the acquisition to be $0.05 dilutive to earnings in the first year of completion. Excluding purchase accounting adjustments and anticipated integration expenses, 3M estimates the acquisition to be $0.01 accretive to earnings.

3M Company, together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. It has more than 35 business units organized into six segments: Consumer and Office, Display and Graphics, Electro and Communications, Healthcare, Industrial and Transportation, and Safety, Security and Protection Services Business. The major competitors of 3M are Avery Dennison Corporation (AVY) and EI DuPont de Nemours & Co. (DD).

We continue to maintain a Neutral rating on 3M Company for the long term and a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.

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