The Rising Influence of Rising Affluence

[DewDiligence]

3M Acquires COGT for $430M Net

http://www.reuters.com/article/idCNN3016689720100830

›Mon Aug 30, 2010 9:00am EDT

NEW YORK, Aug 30 (Reuters) - Diversified U.S. manufacturer 3M Co (MMM) on Monday said it agreed to buy Cogent Inc (COGT) for more than $900 million, paying a nearly 18 percent premium for the biometric identification systems company.

3M said it would pay $10.50 a share to buy Cogent, whose shares closed at $8.915 on the Nasdaq stock market on Friday. Cogent shares jumped to $10.73 in premarket trading.

Net of cash acquired in the deal, 3M said it was paying $430 million for Cogent. The transaction is expected to close during the fourth quarter of the year.

3M said the deal was worth $943 million, but a calculation based on 88.8 million Cogent shares outstanding put the value at $932 million. A 3M spokeswoman said she was not immediately able to explain the slight discrepancy.

Cogent, based in Pasadena, California, makes automated fingerprint and palm-print identification systems that allow its customers to capture fingerprint and palm-print images electronically, encode prints into searchable files, and compare sets of prints.

Cogent had about $130 million in revenue in 2009. 3M expects the purchase to be dilutive to earnings by 9 to 10 cents per share over the first 12 months after closing. Excluding purchase accounting adjustments and integration costs, it expects the deal to add to earnings by 1 to 2 cents per share.

J.P. Morgan advised 3M, while Credit Suisse and Goldman Sachs acted as financial advisers to Cogent Systems.

TARGETING LAW ENFORCERS

3M makes systems for creating and validating documents like passports, as well as products used at national borders. It said the deal will help it expand in the market for law enforcement systems, and estimates the $4 billion biometric market will grow by 20 percent a year.

3M Chief Executive George Buckley said last week that the company could spend about $2 billion on acquisitions in 2010, double its previous estimate for the year.

A series of deals for mid-tier defense companies has lifted valuations of companies that provide the niche surveillance and intelligence technologies.

It is an area where large defense contractors like Boeing (BA) have been stepping up investment. As the United States strengthens its focus on national security, Boeing's peers Lockheed Martin Corp (LMT), Northrop Grumman (NOC), General Dynamics (GD), Goodrich Corp (GR) and BAE Systems Plc (BAES.L), are eyeing a bigger slice of the surveillance and intelligence market.

Cogent competitor L-1 Identity Systems (ID), a maker of fingerprint and iris recognition devices, said last week it was close to announcing a deal, which analysts peg at around $1 billion. L-1 put itself up for sale in March.‹