Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2019

Acquisitions and Divestitures

NOTE 3. Acquisitions and Divestitures

Acquisitions:

3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses and synergies expected to arise after 3M’s acquisition of these businesses.

	2019 Acquisition Activity
			Finite-Lived
			Intangible-Asset
(Millions)			Weighted-Average
Asset (Liability)	M*Modal		Lives (Years)
Accounts receivable	$	77
Other current assets		2
Property, plant, and equipment		8
Purchased finite-lived intangible assets:
Customer related intangible assets		275	14
Other technology-based intangible assets		160	6
Definite-lived tradenames		11	6
Purchased goodwill		517
Other assets		59
Accounts payable and other liabilities		(124)
Interest bearing debt		(251)
Deferred tax asset/(liability)		(30)
Net assets acquired	$	704
Supplemental information:
Cash paid	$	708
Less: Cash acquired		4
Cash paid, net of cash acquired	$	704

Purchased identifiable finite-lived intangible assets related to acquisitions which closed in the six months ended June 30, 2019 totaled $446 million. The associated finite-lived intangible assets acquired will be amortized on a systematic and rational basis (generally straight line) over a weighted-average life of 11 years (lives ranging from 6 to 14 years).

In February 2019, 3M completed the acquisition of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. Based in Pittsburgh, Pennsylvania, M*Modal is a leading healthcare technology provider of cloud-based, conversational artificial intelligence-powered systems that help physicians efficiently capture and improve the patient narrative. The allocation of purchase consideration related to M*Modal is considered preliminary with provisional amounts primarily related to intangible assets, working capital, certain tax-related and contingent liability amounts. 3M expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the second quarter of 2019 were approximately $75 million and $15 million, respectively. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the first six months of 2019 were approximately $125 million and $35 million, respectively. Proforma information related to the acquisition has not been included as the impact on the Company’s consolidated results of operations was not considered material.

In May 2019, 3M entered into an agreement to acquire Acelity Inc. and its KCI subsidiaries for a price plus an amount based on the number of days through closing, which together, are estimated at approximately $4.6 billion, subject to closing and other adjustments. The entities to be acquired also have outstanding debt and related items estimated at approximately $2.5 billion. Acelity is a leading global medical technology company focused on advanced wound care and specialty surgical applications marketed under the KCI brand. This transaction is expected to close in the fourth quarter of 2019 and will be reflected within the Company’s Health Care

business, subject to customary closing conditions, regulatory approvals, and information or consultation requirements with relevant works councils.

There were no acquisitions that closed during the six months ended June 30, 2018.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

2019 divestitures:

During the first quarter of 2019, the Company sold certain oral care technology comprising a business and reflected an earnout on a previous divestiture resulting in an aggregate immaterial gain.

In June 2019, 3M received a binding offer from Teledyne Technologies Incorporated to purchase 3M’s gas and flame detection business for $230 million, subject to closing and other adjustments. This business, with annual sales of approximately $120 million, is a leader in fixed and portable gas and flame detection. The transaction is expected to close in the second half of 2019, subject to customary closing conditions, regulatory approvals and consultation or information requirements with relevant works councils. The Company expects a pre-tax gain of approximately $110 million as a result of this divestiture that will be reported within the Company’s Safety and Industrial business.

2018 divestitures:

During 2018, as described in Note 3 in 3M’s 2018 Annual Report on Form 10-K, the Company divested a number of businesses including: certain personal safety product offerings primarily focused on noise, environmental and heat stress monitoring; a polymer additives compounding business; an abrasives glass products business; and substantially all of its Communication Markets Division.

Operating income and held for sale amounts:

The aggregate operating income of these businesses was approximately $25 million and immaterial in the first six months of 2018 and 2019, respectively. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2018 were not material and as of June 30, 2019 included the following:

	June 30,
(Millions)	2019
Accounts receivable	$	25
Inventory		25
Intangible assets		25

In addition, approximately $50 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of June 30, 2019, based upon relative fair value. The amounts above have not been segregated and are classified within the existing corresponding line items on the Company’s consolidated balance sheet.

Refer to Note 3 in 3M’s 2018 Annual Report on Form 10-K for more information on 3M’s acquisitions and divestitures.