3M (MMM) - Get Report is reportedly taking steps to sell its food safety division, as the manufacturing-and-technology group deals with the coronavirus pandemic, which has dented its sales, a media report says.
The St. Paul, Minn., producer of Post-it notes is working with an adviser on the potential sale, knowledgeable sources told Bloomberg.
The food-safety business offers test kits and other products to help foods companies keep track of sanitation and allergens. It could go for $3.5 billion, one of the Bloomberg sources said.
The sources said no final decision has been taken. The food-safety operation produced $341 million of sales last year, about 5% of the $7.4 billion total for 3M’s entire health-care division, Bloomberg reports.
Morningstar analyst Joshua Aguilar likes the company.
“In our view, 3M is a GDP-plus business,” he wrote in a commentary after 3M’s July earnings report.
“We attribute 3M's ability to remain ahead of GDP based on its suite of innovative products that are a byproduct of its R&D efforts. At its core, 3M is a materials science company.”
He said, “The firm's legion of engineers improves everyday products down to their basic chemistry.”
In addition, “the firm's proprietary secrets are closely held as 3M rarely grants licenses, yet its technology is difficult to imitate,” Aguilar said. “As a result, 3M typically charges a 10% to 30% price premium relative to the market.”
The company has “superior gross margins,” he said.
Aguilar puts fair value at $166 for 3M.
3M shares recently traded at $163.64, up 0.8%. They had slipped 3% year to date through Tuesday.