Michigan-based Neogen is combining with 3M's food security business in a tax-free, $5.3 billion deal announced Tuesday.
Existing 3M shareholders will own 50.1 % of the combined company once the transaction closes in the second half of 2022. The company will receive $1 billion in cash and $4.3 billion in equity.
The deal is tax-free due to a reverse Morris trust structure.
Food safety is part of 3M's health care division, one of the four main lines of business for the Maplewood-based company, which has a market value of about $100 billion.
"By combining our food safety business with Neogen, we will create an organization well positioned to capture long-term profitable growth," 3M chief executive Mike Roman said in a statement. "This transaction further evolves our strategy, focuses our health care business and benefits our stakeholders, as we actively manage our portfolio to drive growth and deliver shareholder value."
Roman made a similar comment earlier this month when asked if 3M was planning to go the way of General Electric and spin off core units.
"We have a history as a company of shifting our portfolio to where we can uniquely drive value," he said during the Credit Suisse Virtual Industrials Conference. "That increasingly over the past decade has included divestitures."
The bulk of 3M's food safety products relate to laboratory testing and environmental hygiene. Neogen also produces testing supplies and sanitation devices in addition to animal DNA sequencing and other genomics services.
"This combination will harness the power of both businesses' technology capabilities to improve food and animal security everywhere, from breeding healthy animals to sanitizing the factory floor and on to the rest of the supply chain," Neogen CEO John Adent said in an investor presentation Tuesday morning.
Neogen will keep company leaders Adent and board chair Jim Borel while bringing in "executives and personnel from both Neogen and 3M Food Safety," plus two new 3M-appointed board members, the company said.
Neogen plans to eventually bring production of 3M's PetriFilm to an expanded facility in Lansing, Mich.
For 3M, proceeds from the deal will go toward dividends and debt payments.
"We expect the combined company will benefit from an enhanced geographic footprint, complementary and innovative product offerings and digitization capabilities," Mojdeh Poul, 3M's group president of health care, said in the investor presentation. "For 3M's food safety employees, we expect this transaction to create growth and career development opportunities as part of an innovative leader in a high-growth industry."
