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Letter to the Editor
Friday May 13
3M to Acquire CUNO
3M and CUNO Inc. 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 is a leader in the design, manufacture, and marketing of a comprehensive line of filtration products for the separation, clarification, and purification of fluids and gasses."Liquid filtration demand is growing rapidly, driven by critical customer needs for enhanced liquid separation and pure water," said Harold Wiens, executive vice president, 3M Industrial Business. "Our current air filtration business based upon our separation and filtration technologies totals well over $1 billion. We see multiple opportunities to take advantage of the complementary positions of the two companies, and believe that combining 3M's technology and global presence with CUNO's large and expanding installed base and strong product portfolio will enable us to achieve significant revenue and cost synergies."
CUNO has become a leader by providing innovative liquid filtration solutions to customers in many of the same industries 3M serves, including industrial, health care, consumer, and transportation. CUNO has demonstrated a strong track record of consistent and impressive growth and profitability, with sales increasing at a compound annual growth rate of more than 9 percent and earnings per share growing at a compound annual growth rate greater than 30 percent during the past ten years.
CUNO products include proprietary depth filters and semi-permeable membrane filters used in a broad range of potable water, health care and fluid processing applications. These products effectively remove contaminants that range in size from molecules to sand particles. CUNO estimates its aftermarket replacement sales at more than 70 percent, which provides a predictable revenue stream.
3M provides a range of primarily air filtration solutions to customers in most of its business segments, leveraging proprietary 3M technologies such as membrane and non-woven. 3M filtration products include Filtrete brand residential and commercial air filters, and Empore brand filtration products used in the health care market.
Mark G. Kachur, chairman and CEO of CUNO commented on the transaction, saying "This all cash merger will deliver excellent value to our shareholders. 3M and CUNO will be able to efficiently deliver a much broader range of solutions to a diverse global customer base and bring new filtration products to market faster. Our companies share a culture of innovation and operational excellence, and the CUNO team is excited about working with our 3M colleagues around the world."
"These two great companies have complementary sets of filtration products and the opportunity to bring an even wider range of innovative filtration solutions more effectively to customers around the world," said W. James McNerney, Jr., 3M chairman and CEO.
3M plans to fund the transaction with existing cash. The acquisition is expected to be accretive to 3M's earnings in 2006 and does not change the company's 2005 earnings per share guidance. The acquisition is expected to close in the third quarter subject to regulatory and CUNO shareholder approval and other customary closing conditions.
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