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3M to Divest Drug Delivery Business to Altaris Capital Unit

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3M Company MMM recently announced that it has inked an agreement with an affiliate of Altaris Capital Partners, LLC to divest considerably all of its drug delivery business. The deal, worth of about $650 million, includes cash, a 17% noncontrolling interest in the new company and an interest-bearing security. The deal is subject to customary closing conditions and regulatory approvals, and is projected to close in the first half of 2020.

Details of the Divestment Deal

3M’s drug delivery business is engaged in developing and producing pharmaceutical products, leveraging transdermal, inhalation and conventional drug delivery technologies. It’s worth noting here that the business considered for divestment has annual global sales of roughly $380 million. Meanwhile, the company will continue to operate its transdermal drug delivery components business.

As noted by 3M, about 900 employees of its drug delivery business are likely to join the new company as a result of the divestment. As a matter of fact, the deal will enable the company to emphasize on its core health care business.

On completion, the deal is likely to lead to a gain of 45 cents to 50 cents per share for 3M, The company will report its ownership interest in the drug delivery business with the help of the equity method of accounting.

Other Inorganic Moves

Some other notable inorganic activities completed by the company are the sale of its gas and flame detection business to Teledyne Technologies Inc. TDY and an agreement to sell its advanced ballistic-protection business to Avon Rubber, both in August 2019. In addition, 3M divested its communication markets business in 2018 while completed the buyout of the technology business of M*Modal in February 2019. Also, it completed the acquisition of Acelity Inc and its KCI subsidiaries in October. In this regard, acquired assets and divestments had a net positive impact of 0.6% on sales in the third quarter of 2019.

3M currently carries a Zacks Rank #3 (Hold). In the past six months, the company has returned 1.1% compared with the industry’s growth of 6.3%.

Key Picks

A couple of better-ranked stocks from the same space are Macquarie Infrastructure Company MIC and ITT Inc. (ITT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Macquarie surpassed estimates twice in the trailing four quarters, the average positive earnings surprise being 5.34%.

ITT outpaced estimates in each of the preceding four quarters, the average positive earnings surprise being 7.85%.

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