After a slow 2009, 3M (NYSE: MMM) is back on a shopping spree in 2010. CEO George Buckley brought an acquisition strategy when he joined 3M from Brunswick (NYSE: BC), and after completing only four acquisitions in 2009, 3M is shopping again, with eight targets so far in 2010.
3M bought Arizant last week, a Minnesota-based maker of heated blankets for the health-care market, for $810 million. This will be added to the myriad products made by the $4.3 billion health-care business.
Last week, 3M also began its tender offer of $10.50/share or $943 million for Cogent Inc. (Nasdaq: COGT) a biometric identification firm. Even though the company fits well with 3M's move into identification and security, this one was a bit of a head-scratcher to me. Cogent only had sales of $130 million and $32.5 million net income last year. Dow's offer seems excessive for a firm with negative compound net income growth over the past five years.
In contrast to these two big purchases, most of the 67 acquisitions 3M has made since 2005 have been small "tuck-in" companies like the $230 million Attenti Holdings deal announced late last month. Even though this deal was small, it is expected to be dilutive to earnings over the next year.
The acquisition strategy has had mixed results for 3M. I expect a higher growth rate than 3M's 3.18% over the past five years if it is going to be spending billions of dollars on acquisitions. Still with a diversified manufacturing base, a P/E just over 15, and almost $5 billion in cash on the books, 3M is a reasonable value. I just think there are better uses for its cash than questionable buyouts.
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