3M to make $1B acquisition, biggest in 8 years

3M Co. is plunging back into the land of billion-dollar deals after an eight-year hiatus.

The Maplewood-based conglomerate on Monday announced that it will pay $1 billion to acquire the assets of Polypore International Incorporated's ultrafiltration business.

Polypore's Separations Media business is expected to give 3M new technology and about $210 million in annual sales, provided the deal first gains the necessary regulatory and shareholder approvals.

3M's acquisition is just one part of Polypore's plans. North Carolina-based Polypore International will sell the remaining portion of itself to Japan-based Asahi Kasei for about $2.2 billion. The closing of each deal is contingent upon the completion of the other.

3M investors were pleased. The company's stock rose to a 52-week high in early trading Monday. It closed slightly lower, hitting $168.81, for an increase of 69 cents a share on a volatile trading day when most Wall Street industrial stocks declined.

The Polypore division that 3M is buying makes sophisticated "microporous" membranes and filters that remove or separate tiny microscopic particles from water, blood and other liquids.

The unit's "flat sheet" and "hollow" membranes are frequently used in hospitals, in kidney dialysis clinics and in factories that make pharmaceuticals, semiconductors, lithium batteries and other products.

"One of the hallmarks of 3M is that they have high margin businesses that typically produce 20 percent [margins]. This [Polypore] business has operating margins in the upper 20s before 3M even touches them," with any cost-cutting efforts, Arnold said.

3M said the purchase will be financed with cash mostly from outside the United States. The acquisition is expected to cut 3M earnings by 3 cents a share during the first year. Excluding the purchase price, it should add 4 cents a share, the company said.

"It's not a big needle mover initially," Arnold said. "But over time, as they integrate this, there is an opportunity for 3M to grow it faster."

Arnold said the investment community has "been watching for [3M] deal flow to pick up" ever since 3M said it would sniff for large deals. After years of waiting, "Finally we got a material deal."

3M officials said they expect the acquisition to blend well with 3M's existing purification business, which filters residential water and caters to commercial food service, industrial and health care customers.

3M, with $31 billion in annual revenue, said just over a year ago that it would consider larger acquisitions in the future. Thulin said 3M plans to spend anywhere between $5 billion and $10 billion on acquisitions between 2013 and 2017. He noted that previous acquisitions stopped near $1 billion and that future deals may need to exceed that amount.

Of the 39 companies 3M bought in the past decade, only 11 were large enough to require price disclosures. Of those 11, only three scratched $1 billion. 3M made no major acquisitions during the last two years.

In 2007, 3M bought eye and hearing protection firm Aearo Technologies for $1.2 billion to expand its safety business. 3M also bought Cuno Inc., a water filtration firm, in 2005 for $1.3 billion so it could expand beyond its air-filtration capabilities. In 2012, 3M purchased high-strength-ceramics maker Ceradyne for $860 million.

Polypore International is based in Charlotte, N.C., and has manufacturing plants and sales offices in nine countries. The filtration business represents about one-third of company revenues.

Dee DePass • 612-673-7725