3M Company (MMM) is all set to acquire a manufacturer of quick cure, light-weight polysulfide sealants for aerospace applications, Advanced Chemistry & Technology Inc. (AC TECH). The companies have entered into an agreement but did not disclose the terms of the deal.
The demand for aircraft sealants, used to prevent corrosion, seal critical gaps, and protect from foreign object debris, has increased significantly and is expected to show substantial growth over the next several years. The addition of new aircraft platforms will help 3M to benefit substantially from the rising demand. AC TECH’s collection of fast-curing polysulfide sealants matches 3M’s aerospace material offerings and custom engineered solutions.
The acquisition will increase the company’s presence in the aerospace market for the manufacture and maintenance of commercial and military aircraft. The combined effort of AC TECH and 3M will provide expanded value-added solutions to the customers, which will help them to produce lighter, safer aircraft components and structures in a faster, and more cost-effective manner.
Strong cash flow position and continuously expanding sales revenue provides 3M ample resources to expand through acquisition and innovation of new products. 3M is known globally recognized for its innovations, together with some of its well-known brands such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard being the market leaders. 3M is a leading provider of innovative products such as adhesives and sealants, surface protection, and thermal acoustic solutions to original equipment manufacturers, tier suppliers and maintenance, repair and overhaul providers for the commercial and military aviation industries. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.
However, the company’s growth objectives are largely dependent on timing and market acceptances of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to the market at acceptable price points. Further, the results have been impacted by worldwide economic and capital market conditions.
Negative consumer sentiment is affecting the retail store traffic. On the corporate side, lower employment levels are negatively reducing office supply purchases in most companies.
3M Company together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. It has more than 35 business units organized into six segments: Consumer and Office, Display and Graphics, Electro and Communications, Healthcare, Industrial and Transportation, Safety, Security and Protection Services Business. Major competitors of 3M are Avery Dennison Corporation (AVY), EI DuPont de Nemours & Co. (DD) and Johnson & Johnson (JNJ).
We continue to maintain a Neutral rating on 3M Company for the long term. The company has a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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