Research: Evaluation of Merger
Course teacher: D. Main Sarsour
Student's name: Zaina Zughayer
3M and CUNO announced that they have entered into a definitive"
agreement for 3M's acquisition of CUNO in an all cash merger for $72
dollars per share, valuing the transaction at approximately $1.35 billion
"including the assumption of $60 million of existing net debt
CUNO, a leading filtration company, specializes in designing, manufacturing, and marketing
a wide range of filtration products for fluid and gas separation, clarification, and purification.
Its proprietary products cater to healthcare, industrial, and drinking water markets. With
manufacturing facilities across several countries and global sales offices, CUNO ensures
widespread presence and accessibility
On the other hand, 3M is a global, diversified technology company renowned for innovation
and customer-centric solutions. With a portfolio encompassing popular brands like Scotch,
Post-it, and Thinsulate, 3M serves customers in over 200 countries. Its workforce of 67,000
leverages expertise and technology across various sectors including consumer, office,
electronics, healthcare, and transportation
Reason why 3M acquired CUNO .1
3M acquired CUNO primarily due to its leadership position in providing innovative liquid filtration
solutions across various industries, aligning well with 3M's strategic objectives. CUNO's consistent
growth and profitability over the past decade, with impressive compound annual growth rates in
.sales and earnings per share, made it an attractive investment for 3M
CUNO's proprietary depth filters and semi-permeable membrane filters, used in potable water,
healthcare, and fluid processing applications, effectively remove contaminants of various sizes,
.providing a predictable revenue stream primarily from aftermarket replacement sales
3M, with its expertise in air filtration solutions across multiple business segments, saw synergies
with CUNO's liquid filtration products. This acquisition allows 3M to offer a broader range of
filtration solutions to a diverse global customer base and accelerate the introduction of new
.filtration products to the market
Both companies share a culture of innovation and operational excellence, enhancing the potential
for collaboration and efficiency post-acquisition
the merger was perceived positively by both CUNO's CEO, Mark G Kachur, and 3M's chairman and
CEO, W James McNerney, Jr, who emphasized the opportunity to deliver innovative filtration
.solutions more effectively worldwide
Acquisition funded .2
On August 2, 2005, 3M acquired CUNO, integrating its operations into the Industrial Business
segment. CUNO specializes in designing, manufacturing, and marketing filtration products for fluid
and gas separation, clarification, and purification. The acquisition aimed to leverage the
complementary filtration technologies of both companies, expanding the range of filtration solutions
.offered to customers globally
The acquisition cost totaled approximately $1.36 billion, consisting of $1.27 billion in cash (net of
cash acquired) and the assumption of $80 million in debt, a significant portion of which has since
.been repaid
As part of the acquisition, identifiable intangible assets worth $268 million were purchased, which
will be amortized on a straight-line basis over periods ranging from 5 to 20 years, with a weighted
average life of 15 years. There were no material in-process research and development charges
.associated with the acquisition
:The impact of the CUNO acquisition on net accounts receivable .3
The CUNO acquisition increased accounts receivable by $88 million at December 31, 2005 -
Currency translation, attributed to the stronger U.S dollar, reduced accounts receivable by $231 -
million year-on-year
Therefore, the net impact on accounts receivable due to the CUNO acquisition and currency
translation was a decrease of $143 million ($88 million increase from the acquisition - $231 million
.decrease from currency translation)
:The impact of the CUNO acquisition on inventories .4
The CUNO acquisition increased inventories by $56 million at December 31, 2005 -
Currency translation, on the other hand, reduced inventories by $89 million year-on-year -
So, the net impact on inventories due to the CUNO acquisition and currency translation was a
decrease of $33 million ($56 million increase from the acquisition - $89 million decrease from
.currency translation)
