Earlier this year, Corning's (GLW) Optical Communications business finally passed Display Technologies to become its single largest segment -- a shift made possible in recent quarters by telecom giants' enormous investments in their next-generation networks. But if Corning's latest acquisition is any indication, it's only just getting started. Earlier this week, the glass-technology specialist announced it has agreed to purchase substantially all of 3M's (MMM 0.38%) Communication Markets Division for roughly $900 million in cash.

Close up shot of Corning optical fiber with rainbow-colored light in the background


The headline numbers

For perspective, Corning's optical business generated sales of $917 million in its latest quarter, good for year-over-year growth of 15%. In September, Corning also reached a staggering milestone of 1 billion kilometers of optical fiber sold, with The Wilmington Star calling it "the material that revolutionized high-speed communication around the globe."

But with the 3M purchase, Corning is acquiring approximately $400 million in incremental annual sales of high-bandwidth and optical-fiber products, which means a nearly 11% boost to the optical business' top line from its current annual run rate. And it's doing so at a reasonable valuation of less than seven times the division's estimated forward adjusted EBITDA -- that is, at least, including estimated annual run-rate synergies to be realized following the acquisition. As such, the purchase should be accretive to Corning's per-share earnings to the tune of $0.07 to $0.09 in the year following its close.

The bigger picture

Corning investors shouldn't be entirely surprised by the purchase. In late 2015, Corning outlined a multi-year strategic capital-allocation framework under which it pledged to not only return at least $12.5 billion to shareholders through stock repurchases and dividends through 2019, but also invest $10 billion toward sustaining industry leadership and fostering new growth opportunities. This 3M deal falls within the latter sum, where Corning allocated roughly $1 billion to $3 billion for strategic acquisitions.

Corning Optical Communications executive VP Clark Kinlin elaborated:

Corning leads in optical passive components and solutions. This transaction expands both our global market reach and our high-bandwidth portfolio. It also provides new co-innovation opportunities and enhances our ability to serve customers globally. As the industry's only true end-to-end manufacturer and supplier of optical solutions, we look forward to bringing these two strong organizations together and welcoming a group of outstanding employees.

For perspective, those new Communication Markets Division employees will be spread between a headquarters office in Austin, Texas, a dedicated manufacturing facility in France, and other operations in Hannover, Germany. Further, the acquisition should expand both Corning Optical Communications' global reach and its already enviable portfolio of optical hardware and accessories.

In the meantime, Corning says, barring any hiccups with regulatory approval, or the consultation of "relevant works councils," the purchase should be on track to close sometime in calendar year 2018. When that happens, it should effectively reinforce Corning stock's standing as a compelling long-term investment.