3M Company (MMM)

[DewDiligence]

3M commences exchange offer for food-safety/NEOG spinoff:

https://finance.yahoo.com/news/3m-commences-split-off-exchange-164100919.html

3M announced today the commencement of an exchange offer to effect the separation of its food safety business (the "Food Safety Business"), in furtherance of the previously announced Reverse Morris Trust transaction with Neogen Corporation ("Neogen") (NASDAQ: NEOG) through the merger of Garden SpinCo Corporation ("SpinCo"), currently a wholly-owned subsidiary of 3M formed to hold the Food Safety Business, with a subsidiary of Neogen (the "Merger").

Key elements of the exchange offer include:

• 3M stockholders have the option to exchange some, all or none of their shares of 3M common stock for shares of common stock of SpinCo, subject to proration as described below. Shares of SpinCo common stock will convert automatically into the right to receive shares of Neogen common stock at the closing of the Merger, which is expected to occur promptly after completion of the exchange offer.

• Tendering 3M stockholders are expected to receive approximately $107.53 of Neogen common stock for every $100.00 of shares of 3M common stock tendered and accepted in the exchange offer, subject to the upper limit described below.

• 3M will determine the prices at which shares of 3M common stock and shares of SpinCo common stock (and ultimately shares of Neogen common stock) will be exchanged by reference to the simple arithmetic average of the daily volume-weighted average prices of shares of 3M common stock on the New York Stock Exchange and shares of Neogen common stock on the Nasdaq Global Select Market on each of the last three full trading days ending on and including the second full trading day prior to the expiration date of the exchange offer (which are currently expected to be August 25, August 26 and August 29, 2022).

• 3M currently expects that approximately 108.3 million shares of SpinCo common stock will be available in the exchange offer, with the final number dependent on the number of outstanding shares of Neogen common stock outstanding immediately prior to the closing of the Merger. The number of shares of 3M common stock that will be accepted in the exchange offer will depend on the final exchange ratio, the number of shares of SpinCo common stock offered and the number of shares of 3M common stock tendered. Based on recent trading prices of shares of 3M common stock and Neogen common stock, and assuming the issuance of 108.3 million shares of SpinCo common stock, if the exchange offer were fully subscribed, approximately 15.7 million shares of 3M common stock would be accepted for exchange in the exchange offer.

• The exchange offer and withdrawal rights are scheduled to expire at 11:59 p.m., New York City time, on August 31, 2022, unless the exchange offer is extended or terminated.

The 7% discount makes this (tax-free) exchange offer quite attractive. However, I consider 3M undervalued in light of the recent action on the earplug litigation (#msg-169496455), which argues against swapping. I haven’t yet decided whether to tender any, or all, of my 3M shares.

Note: The agreement to merge 3M’s food-safety business with NEOG in a Reverse Morris Trust was announced in Dec 2021 (#msg-167115003); however, the exchange offer described above was first mentioned today.