Corning splashing $900m on 3M's communications division

12 Dec 2017

To strengthen global market reach and expand high-bandwidth portfolio. Acquisition business "worth $400m in annual sales."

Optical materials, components and fiber supplier Corning has this week agreed to purchase most of 3M’s Communication Markets Division in a cash transaction valued at approximately $900 million. The acquisition is expected to close during 2018, subject to customary closing conditions.

Corning’s Optical Communications segment is expected to acquire around $400 million in annual sales of high bandwidth and optical fiber products. Corning said the effective enterprise value of the transaction will be less than seven times the Communication Markets Division’s estimated forward-annual adjusted earnings.

This part of 3M’s business consists of optical fiber and copper passive connectivity solutions for the telecommunications industry including 3M’s own xDSL, FTTx, and structured cabling solutions and, for certain countries, telecommunications system integration services. Approximately 500 3M employees are expected to join Corning upon completion of the transaction.

Clark Kinlin, executive VP, Corning Optical Communications, commented, “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.”

"After completing a thorough strategic review, we believe that this [part of 3M’s] business will be well positioned with Corning,” said Ashish Khandpur, 3M’s executive VP, Electronics & Energy Business Group. “I want to thank our Communication Markets Division team for their outstanding contributions.”

Long-term strategy

3M commented that it expects to realize a gain of approximately $0.40 per share from this transaction, net of actions related to the divestiture. Goldman Sachs & Co. LLC acted as the exclusive financial advisor to 3M.

The pending acquisition is part of Corning’s multi-year Strategy and Capital Allocation Framework, which is designed to create significant value for shareholders by focusing the company’s portfolio and utilizing its financial strength. A key component of the Framework is the company’s plan to invest approximately $1 billion to $3 billion in acquisitions.

3M’s Communication Markets Division is headquartered in Austin, Texas, and has a dedicated manufacturing facility in Pontchâteau, France, and operations in Hannover, Germany. The acquisition is subject to consultation or information requirements with relevant works councils, as well as customary closing conditions and regulatory approvals.

3M continues ‘strong momentum’ in 2018

Conicidental with the Corning acquisition, 3M this week also held its annual outlook meeting. 3M’s Chairman of the Board, President and CEO Inge Thulin announced that the company is expecting another strong performance in 2018. “The 3M team is delivering a robust performance in 2017, and is well-positioned to build on that momentum in 2018 – including strong, broad-based organic growth and expanded profitability,” he said. “We are executing the 3M Playbook, which is making us even more competitive and enabling us to generate premium value for our customers and shareholders.”

Thulin discussed the company’s three key levers, which are significant value-creators and key components of the 3M Playbook. “The first lever – Portfolio Management – is increasing customer relevance and allowing 3M to focus on its most profitable and fastest-growing businesses; since 2012, the company has realigned from 40 businesses to 24, while making strategic acquisitions and divestitures.

He continued, “Investing in Innovation is the second lever, and in 2018, 3M plans to increase investments in research and development to $1.9 billion, or about 6 percent of sales. 3M continues to make good progress on its third lever – Business Transformation – which is enabling the company to better serve customers with even more agility and efficiency.”