New acquisitions increase 3M's share in security marketby Martin Moylan, Minnesota Public Radio
St. Paul, Minn. — 3M, the maker of products like Post-it Notes and sandpaper today took a big step into the business of people-watching.
The Minnesota-based company is buying an Israeli company that makes tools for electronic tracking, monitoring and identification.
The deal comes a day after 3M said it plans to spend nearly $1 billion on a California firm that develops automated systems that read finger and palm prints.
Now, 3M is paying $230 million for Attenti Holdings, an Isreali company whose products include ankle bracelets that keep track of people, remote alcohol-monitoring devices and a voice-verification system.
Most of Attenti's sales are to law enforcement authorities.
3M Chief Financial Officer Pat Campbell told Wall Street analysts today that the Attenti and Cogent deals are part of a strategy to increase company sales by acquiring businesses poised for rapid growth. Campbell said 3M sees a lot of growth opportunity in the security business.
"Both these acquisitions are market spaces that are 20 percent growth businesses, which is part of our aspiration when we look at new acquisition candidates," Campbell said. "It does strengthen our position in high security credential, issuance and authentication, law enforcement apps, access control and other commercial applications."
Campbell says the monitoring technology can be used to track growing populations of people who are supposed to be to be monitored.
"People on parole, sex offenders. If you look at the over-capacity in prisons today, the cost of maintaining people incarcerated versus home, if you look at the need in elder care and so forth, this is a very nice market segment for us," Campbell said.
Analysts say the acquisitions fit well with existing 3M businesses, such as those that help governments check passports and help libraries inventory and guard their books.
Morningstar analyst Adam Fleck doesn't see 3M trying to be a dominant player in the security space, just a smart, highly profitable player in selected areas.
"I think the key is if they focus on the high-growth niches and the profitable niches, they can capture some of that growth without being and without needing to be the largest player in the end market," Fleck said.
Fleck doesn't see 3M wanting to challenge national security industry leaders like Boeing and Lockheed Martin.
"I'm not sure 3M really wants to go up directly head-to-head with those big defense guys who already have government relations," he said.
3M isn't done buying companies. The company has signaled it might spend $2 billion this year on acquisitions.
Jeff Windau, an analyst with Edward Jones, said acquisitions are going to be a part of 3M's long-term strategy.
"Obviously over the last couple of days, they've been targeting some higher growth areas. I think that's just typical of how they manage their business," Windau said. "It looks like they're still very focused on the long-term growth of the company."
And that growth is now taking 3M deeper into security, further expanding the breadth and depth of 3M's products and services, which range from sandpaper and dental braces to traffic signs and light-enhancing films for TVs.
Both Attenti and Cogent will become part of 3M's safety and security division. That unit accounts for about $3 billion of 3M's some $23 billion in annual sales.
3M shares were down about 1.5 percent today, closing at $78.55.
- All Things Considered, 08/31/2010, 4:45 p.m.