3M completes Scott Safety acquisition
On October 4, 2017, 3M (MMM) announced the completion of the acquisition of Scott Safety from Johnson Controls (JCI) for a total enterprise value of $2.0 billion. MMM entered into an agreement in March 2017, and the deal was expected to close in 2H17. The Scott Safety business had annual revenues of ~$575 million.
The completion of this acquisition will likely be reflected in MMM’s 4Q17 earnings. MMM expects that the acquisition will add up $0.08 to its dilutive earnings per share in 4Q17. Scott Safety specializes in manufacturing gas and flame detection instruments and other safety devices that will enhance the portfolio of MMM’s Safety and Graphic’s segment, which reported revenues of $1.5 billion in 2Q17. This represented a 0.9% YoY (year-over-year) fall.
MMM’s stock performance
MMM stock gained 3.2% and closed at $216.52 for the week ended October 6, 2017. The gain in MMM’s stock price has caused a further widening of the 100-day moving average gap. MMM was trading 4.5% above the 100-day moving average price of $207.26, indicating an upward trend in the stock.
On a YTD (year-to-date) basis, the stock has returned 21.3%. MMM is now trading 5.1% above the analysts’ consensus target price of $206.00. MMM’s RSI (relative strength index) level of 72 indicates that the stock has temporarily moved into overbought position and might face selling pressure.
The SPDR Dow Jones Industrial Average ETF (DIA), which had 6.5% in MMM on October 6, 2017, underperformed MMM for the week, with a return of 1.7% and a close of $227.55. The top holdings of DIA include Boeing (BA) and Goldman Sachs (GS), which have weights of ~7.8% and ~7.4%, respectively.