3M Moves To Acquire Medical Company -- WSJ

By Colin Kellaher

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 3, 2019).

3M Co. on Thursday said it agreed to buy wound-care company Acelity Inc. from an investor group for about $4.3 billion as the manufacturing and technology conglomerate continues to build its health-care business.

The St. Paul, Minn., company is buying Acelity from private-equity firm Apax Partners and Canadian pension giants Canada Pension Plan Investment Board and Public Sector Pension Investment Board for a total enterprise value of about $6.7 billion, including the assumption of roughly $2.4 billion in debt.

Acelity last month filed for an initial public offering as KCI Holdings Inc., more than seven years after the buyout group acquired the company, then known as Kinetic Concepts Inc., in a deal valued at about $6.3 billion.

Since then, KCI has transformed into a company focused on advanced wound care and specialty surgical applications through a series of acquisitions and divestitures.

3M said Acelity, which complements its health-care business, posted revenue of $1.5 billion and adjusted earnings before interest, taxes, depreciation and amortization of $441 million in 2018. The company in March said it expected its health-care segment to generate annual revenue of $7 billion.

"This acquisition bolsters our Medical Solutions business and supports our growth strategy to offer comprehensive advanced and surgical wound-care solutions to improve outcomes and enhance the patient and provider experience," said Mike Roman, 3M's chief executive.

3M earlier this year acquired the technology business of health-care-technology provider M*Modal for a total enterprise value of $1 billion, expanding the capabilities of its health-information-systems business.

3M said the Acelity purchase price represents a multiple of 15-times 2018 adjusted Ebitda, or 11-times the expected first-year Ebitda after factoring in anticipated cost savings.

The company said it expects the deal will add 25 cents a share to adjusted earnings in the first 12 months, but noted it will reduce reported per-share earnings by 35 cents over the same period.

As a result of the transaction, 3M lowered its planned share repurchases for this year to $1 billion to $1.5 billion from a prior target of $2 billion to $4 billion.

3M said it expects to complete the transaction, which it will finance with cash on hand and the issuance of new debt, in the second half.

S&P Global Ratings on Thursday affirmed its "AA-" credit rating on 3M but changed its outlook to negative from stable, citing the increased leverage from the Acelity deal and 3M's weaker-than-expected first-quarter earnings.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

May 03, 2019 02:47 ET (06:47 GMT)

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