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3M to Acquire Acelity and Cuts Down on Share Repurchases for 2019

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3M to acquire Acelity

In a press release on May 2, 3M (MMM) announced that it has entered a definitive agreement to acquire Acelity and its KCI subsidiaries. The deal is valued at an enterprise value of $6.27 billion including the assumption of Acelity’s debt. 3M also announced that due to this acquisition, it had revised its share repurchases to be in the range of $1.0 billion to $1.5 billion as against the earlier range of $2.0 billion to $4.0 billion.

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The deal is estimated at approximately 15 times the company’s 2018 adjusted EBITDA. Through this acquisition, 3M expects to add $0.25 per share excluding one-time expenses to its earnings in the first year after the deal is closed.

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Acelity is a leading global medical technology company that focuses on wound care and specialty surgical applications. 3M’s CEO, Mike Roman, said, “Acelity is a recognized leading provider of advanced wound care technologies and solutions and an excellent complement to our Health Care business. This acquisition bolsters our Medical Solutions business and supports our growth strategy to offer comprehensive advanced and surgical wound care solutions to improve outcomes and enhance the patient and provider experience. We are excited to bring Acelity’s technologies and dedicated employees to our team. Together, we will apply 3M science to bring differentiated offerings to key wound and operative care solutions worldwide.”

3M stock update

3M stock experienced one of its biggest single-day falls after its Q1 2019 earnings were announced. Investors did not appear to be excited by the acquisition news, and the stock declined by 0.7%. 3M closed at $184.75. On a year-to-date basis, 3M’s stock has fallen 5%, while peers Stanley Black & Decker (SWK), Caterpillar (CAT), and Deere (DE) have gained 26.2%, 7.6%, and 13.0%, respectively.

Investors can hold 3M indirectly by investing in the SPDR Dow Jones Industrial Average ETF (DIA), which invests 4.8% of its portfolio in 3M as of May 2.

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