3M Co, a seller of circuitry and television parts, agreed to buy the Corning Inc unit that makes lenses for high-definition TVs for US$850 million in cash, the largest acquisition in its 100-year history.
Corning said it expects a gain of US$400 million from the sale and will use proceeds to pay down debt and increase contributions to its US pension plan. 3M, maker of more than 50,000 products, will expand to include sales of parts for TVs 40 inches or larger.
3M is taking advantage of the growth in sales of higher-quality digital televisions to help boost revenue after declining earlier in the year. Sales at the Cincinnati-based Corning Precision Lens unit are rising by more than 10 percent, meeting 3M Chief Executive James McNerney's benchmark for acquisitions.
"McNerney is targeting acquisitions with growth rates higher than most existing products to jump start sales," said Mark Demos, an analyst with Fifth Third Investment Advisors, which owns 3M shares among US$34 billion in assets.
"They're buying from a company that obviously needs the cash." Corning, the largest maker of optical fiber, has been hurt by five straight quarters of falling revenue, and has been selling or shutting units as telephone-service companies cut spending. Its Precision Lens unit, which also makes parts for bar-code scanners, garage-door devices and printers, was profitable so far this year.
"The money will improve its liquidity, but not the credit rating or negative outlook," Standard & Poor's analyst Robert Schulz said. "This unit has had pretty steady profit and sales growth in contrast to some of Corning's other businesses such as cable and fiber optics. They managed to get a pretty good price."
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