3M Expands Medical-Products Business in Record $4.3 Billion Deal
Comment of the Day

May 02 2019

Commentary by Eoin Treacy

3M Expands Medical-Products Business in Record $4.3 Billion Deal

This article by Richard Clough for Bloomberg may be od interest to subscribers. Here is a section:

3M Co. agreed to buy medical-products maker Acelity Inc. for about $4.3 billion, its biggest acquisition ever, as new Chief Executive Officer Mike Roman takes a more aggressive approach to expanding the beleaguered company.

The purchase, from a group of funds advised by Apax Partners, is spurring 3M to scale back share repurchases to conserve cash. 3M will cut buybacks to between $1 billion and $1.5 billion this year from a previous expectation of as much as $4 billion, according to a statement Thursday. The company valued the purchase at $6.7 billion including Acelity’s debt, which was $2.4 billion on Dec. 31.

Eoin Treacy's view

Buying back shares has been the go-to strategy for many companies over the last decade because the cost of borrowing has been so low which has made debt more appealing that equity. The practice helps to improve earnings per share, helps investors avoid paying taxes on dividends received and increases the value of shares owned by senior executives. The one thing buybacks do not do is help with creating new products.

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