Acquisitions and Divestitures

3 Months Ended

Mar. 31, 2020

Acquisitions and Divestitures

Acquisitions and Divestitures

NOTE 3. Acquisitions and Divestitures

Refer to Note 3 in 3M’s 2019 Annual Report on Form 10-K for more information on relevant pre-2020 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.

2020 acquisitions:

There were no acquisitions that closed during the three months ended March 31, 2020.

2019 acquisitions:

In February 2019, 3M completed the acquisition of all of the ownership interests 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. The allocation of purchase consideration related to M*Modal was completed in the fourth quarter of 2019. 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 quarter of 2019 were approximately $50 million and $20 million, respectively. M*Modal is reported within the Company’s Health Care business.

In October 2019, the Company completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries and in the first quarter of 2020 paid certain consideration previously accrued under the terms of related agreements. Adjustments in 2020 to the purchase price allocation were approximately $18 million and related to ongoing identification and valuation of certain acquired assets. The change to provisional amounts did not result in material impacts to results of operations in 2020 or any portion related to earlier quarters in the measurement period. The allocation of purchase consideration related to Acelity is considered preliminary with provisional amounts primarily related to intangible assets, and 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 in the fourth quarter of 2019 were approximately $350 million and $45 million, respectively. Acelity is reported within the Company’s Health Care business.

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.

Announced divestitures:

In December 2019, 3M agreed to sell substantially all of its drug delivery business to an affiliate of Altaris Capital Partners, LLC. Subject to closing and other adjustments, 3M will receive approximately $650 million in consideration including cash, an interest-bearing security, and a 17 percent noncontrolling interest in the new company. The business that is being divested has annual sales of approximately $380 million. 3M will retain its transdermal drug delivery components business. The sale is expected to close in the second quarter of 2020, subject to customary closing conditions and regulatory approvals. 3M expects a pre-tax gain of approximately $380 million as a result of the divestiture that will be reported within the Company’s Health Care business. Following completion of the transaction, 3M will reflect its ownership interest in the divested business using the equity method of accounting.

2020 divestitures:

In January 2020, 3M completed the sale of its advanced ballistic-protection business to Avon Rubber p.l.c for $86 million in cash and recognized certain contingent consideration from the outcome of pending tenders. Further contingent consideration of less than $25

million may be recognized depending on outcomes in the future. The business, with annual sales of approximately $85 million, consists of ballistic helmets, body armor, flat armor and related helmet-attachment products serving government and law enforcement. Within the Transportation and Electronics business, 3M reflected immaterial impacts in the third quarter of 2019 as a result of measuring this disposal group at the lower of its carrying amount or fair value less cost to sell and in the first quarter 2020 related to completion of the divestiture and recognition of contingent consideration.

2019 divestitures:

During 2019, as described in Note 3 in 3M’s 2019 Annual Report on Form 10-K, the Company divested a number of businesses including: certain oral care technology comprising a business and the gas and flame detection business. 3M also reflected an earnout on a previous divestiture.

Operating income and held for sale amounts:

The aggregate operating income of these businesses was approximately $25 million and immaterial in the first three months of 2020 and 2019, respectively. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of March 31, 2020 and December 31, 2019 included the following:

	March 31,		December 31,
(Millions)	2020		2019
Inventory	$	60		70
Property, plant and equipment		135		150
Intangible assets		—		35

In addition, approximately $20 million and $30 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of March 31, 2020 and December 31, 2019, respectively, 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.