) is set to acquire the remaining 25% stake of Sumitomo 3M Ltd. for
¥90 billion (approximately $885 million). The transaction, expected
to conclude on Sep 1, 2014, will make 3M a 100% stake owner in
Sumitomo 3M Ltd.
Sumitomo 3M Ltd. was established in 1961 as a joint venture between
3M, Sumitomo Electric and NEC Corp. In 2003, 3M acquired NEC's
stake, thereby obtaining 75% stake in the venture. The present cash
buyout will take its stake to 100%, allowing the conglomerate to
take complete control over one of its most successful subsidiaries.
Osaka-based Sumitomo Electric is a leading electric wire and
optical cable maker. The company, after incorporating the impact of
its sale to 3M, increased the group net profit outlook for the
current fiscal year to ¥111 billion from ¥70 billion, as reported
by The Wall Street Journal.
3M expects the acquisition to be accretive to its earnings by
approximately 8 cents per share, during the 12 months immediately
following the closing of the transaction. The strategic investment
will allow 3M to build on its lucrative, stable presence in Japan
as it deploys additional capital for its subsidiary.
According to Moody's Investors Service, a leading credit rating
agency, 3M's cash purchase of a 25% stake in Sumitomo 3M will be
neutral to its credit ratings and outlook. The conglomerate's
current Aa2 rating, with a stable outlook, indicates high credit
3M currently has a Zacks Rank #3 (Hold). Other better-ranked stocks
Noble Group Ltd.
Macquarie Infrastructure Company LLC
Hutchison Whampoa Limited
). While Noble Group sports a Zacks Rank #1 (Strong Buy), both
Macquarie and Hutchison Whampoa carry a Zacks Rank #2 (Buy).
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