As A Part Of Its Growth Strategy, 3M Divests From Some Of Its Businesses

On December 8, 3M (NYSE:MMM) announced its decision to sell its identity management business, within the Traffic Safety and Security Division, to Gemalto, the world leader in digital security, for $850 million. There are three components included in the business which will become a part of Gemalto’s Government Programs business – the biometric offerings that 3M got following the Cogent acquisition, a document reader line, and 3M’s secure materials business. On the whole, these three areas generate $215 million annually, and the yearly profit from the operations stands at $58 million. Headquartered in the US, and present on three continents, 3M’s Identity Management Business offers biometric end-to-end solutions, enabling identity verification and authentication. It is used by governments, law enforcement, border control, and civil identification bodies worldwide. The business has a highly skilled team of 450 experts, that has developed biometric algorithms (finger, face, iris, etc.), and is at the forefront of innovation with the latest multi-modal biometric solutions.

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From Gemalto’s standpoint, this deal helps the company to complete its government programs offer by in-sourcing the biometric technology, and positions the company in a favorable position in the commercial biometrics market. Its prior experience in the public sector in the enrollment, identification of individuals, flow of passengers, and border control, coupled with the proposed acquisition, will contribute to stronger national security. Furthermore, on the commercial side, with the rise in online and mobile transactions, new ways of multi-factor authentication and identification are required. The combining of market access and technologies will allow the company to take advantage of this trend. Once the acquisition is completed, anticipated to occur in the first half of 2017, it will become a part of Gemalto Government Programs business, which recorded a revenue of €391 million in 2015. According to the company’s estimates, the acquired business revenue is expected to grow at an over 10% CAGR, with EBITDA margins above 20% by 2020.

In another deal, announced on December 6, 3M entered into an agreement to divest its safety prescription eyewear business to HOYA Vision Care. This business is a part of 3M’s Personal Safety division, which is in the Safety & Graphics business. 3M’s prescription eyewear business offers a wide variety of frames, prescription lenses, and premium coating solutions on customized products. The business, with over 90 years of experience as an industry leader in the safety prescription eyewear market in North America, has annual global sales of approximately $45 million. After a thorough strategic review, the company decided to divest itself from the business, in order to focus on the core personal safety business, according to Bernard Cicut, vice president and general manager, Personal Safety division. The company will retain its safety non-prescription eyewear business, referred to as Plano eyewear. 3M can be considered as a leader in providing personal safety solutions, which include respiratory protection, fall protection, hearing protection, and Plano eye protection.

3M has been very active on the M&A front in recent years, having made significant acquisitions such as Capital Safety, Polypore’s Separations Media business, and Ivera Medical Corp. Meanwhile, the company has also made an effort to slim down. Some of the big-ticket sales include that of its Static Control and Library Systems businesses, and Faab Fabricauto. In the beginning of 2015, 3M completed the sale of its Static Control business, which provides products that help prevent, detect, and protect against electrostatic discharge events, to Desco Industries. After a meticulous strategic review, the company made the decision for a sale of this segment, which had annual global sales of ~$45 million and employed 175 workers. The company also entered into agreements with One Equity Partners Capital Advisors for the sale of assets of its North American Library Systems and for the majority of its remaining global Library Systems business outside of North America. The sale ends 3M’s business in a segment in which it was prevalent for over 40 years, and wherein it popularized products like book sensor tape, electronic checkouts, and digital uploading of library e-books. 3M France also received a binding offer for 100% of the shares of Faab Fabricauto, which has annual sales of ~$30 million, and is a leading French manufacturer of license plates and signage solutions.

Since 2012 to early 2016, 3M has pruned its businesses from 40 to 26, thereby improving customer relevance, productivity, and speed, through a leaner operating structure. At the same time, 3M has steadily invested into R&D to develop innovative products. The company has stated its intentions to invest $1.8 billion in R&D during Financial Year 2016, to drive organic growth, and complement it through strategic acquisitions.

Have more questions on 3M? Have a look at these links below:

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• 3M Trims EPS Guidance Amid Flat Sales
• Will 3M’s Health Care Division Again Drive Growth In The Third Quarter?
• 3M Teams Up With Alphabet’s Verily For Population Health Management Tools
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• What Trends Will Ensure Growth For 3M From Developing Markets In The Future?
• How Important Is The US For 3M?

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