3M buying Winterthur Tech; deal streak continues

By James B. Kelleher

CHICAGO (BestGrowthStock) – Diversified U.S. manufacturer 3M Co (MMM.N: ) will buy Winterthur Technologies AG (WTGN.S: ), a Swiss maker of grinding tools, for about $448 million in a move that will fill out its already sizable abrasives business.

The deal is the latest in a string of nearly a dozen acquisitions this year for 3M, which has spent nearly $2.5 billion in just the four deals whose terms the company has disclosed.

The purchases have taken 3M, which already has a broad lineup of consumer, industrial and medical products, into new businesses like biometrics and electronic people-monitoring, even as they have bolstered its presence in others, like healthcare.

Shares of Winterthur, whose metal cutting products are used in the automotive, aerospace and energy industries, were up 6.9 percent in Switzerland. 3M shares were off 0.1 percent on the New York Stock Exchange.

Oliver Pursche, the co-portfolio manager of the GMG Defensive Beta Fund (MPDAX.O: ) said 3M’s flurry of M&A activity was part of a broader push by industrial companies to keep their businesses growing at the double-digit rates investors expect in a sluggish environment where organic sales may not grow that fast.

“They’ve made it clear that there were some key businesses they wanted to get into and some key businesses they wanted to bolster and this latest acquisition clearly falls in the latter category,” Pursche said.

“3M, like so many of the large companies, are finding it more and more challenging to grow organically. And so this is a way for them to round out businesses, gain market share, and get into some interesting new businesses where the innovation is taking place.”

Even so, Pursche said “what is getting a little more challenging, in our view, is whether the costs of some of these acquisitions across the board — not just with 3M — are becoming harder to justify given the fact that the overall economy continues to muddle along.”

Pursche said the GMG Defensive Beta Fund had “been active” in 3M shares in recent weeks but declined to say whether it had gone long or short.

Under the agreement, 3M will pay 62 Swiss francs ($63.56) for each share through a public tender offer and the offer is conditional upon a tendering of 66.67 percent of the shares of Winterthur.

The deal, which is expected to close in the first-quarter of 2011, will slightly add to earnings, excluding items, in the first 12 months following the completion, the company said.

Winterthur’s chairman, Dr. Edgar Rappold, will also tender his stake of 14 percent in Winterthur as part of the agreement, 3M said.

Winterthur makes vitrified bonded wheels used to grind gearwheels, crankshafts and camshafts in the auto industry, and to create blades used in aircraft engines and for gas and steam turbines.

It also makes cut-off wheels, essentially massive saws used in steel factories.

(Reporting by James B. Kelleher; Additional reporting by Abhinav Sharma in Bangalore; Editing by Dave Zimmerman and Tim Dobbyn)

3M buying Winterthur Tech; deal streak continues