3M Buys Capital Safety from KKR in a $2.5 Billion Deal

3M Buys Capital Safety3M Company (NYSE/MMM) has bought Capital Safety from KKR & Co. L.P. (NYSE/KKR) as part of a strategy to produce steady sales growth.

The acquisition is worth $2.5 billion, including debt. The deal is expected to reduce the earnings by four cents per share in the first 12 months as part of the $700 million debt. (Source: The Wall Street Journal, June 23, 2015.)

3M shares inched up by less than one percent in early Tuesday morning trading. Moreover, shares have soared by nearly 12% over the past year.

On Tuesday, June 23rd, 3M, which produces “Post-it” notes and other products, said that increasing demand for worker safety in developing countries is driving sales of equipment. Prior to this deal, 3M has gone after smaller acquisitions, mostly below $1.0 billion. However, the company has said it would consider larger acquisitions in the future.

Capital Safety produces fall-protection equipment, harnesses, and other products under the brands Protecta and Dbi-Sala. Capital Safety was bought out by KKR for $1.12 billion in late 2011 from another private equity firm. Since then, Capital Safety made some acquisitions of its own.

“The acquisition of Capital Safety bolsters our personal safety platform and will build on our fundamental strengths in technology, manufacturing, global capabilities and brand,” said 3M Chief Executive Inge Thulin.

The company also added that demand for those types of products is growing; driven by greater regulatory focus on worker safety.

The deal is expected to close in the third quarter, which 3M plans to finance with existing cash.

For investors, the deal would mark a successful exit for KKR after its transaction in November of 2011 while Capital Safety is expected to be integrated into 3M’s personal safety business in which many analysts foresee enormous growth in sales.