Diversified technology company 3M Co. (MMM) agreed Monday to acquire Cogent, Inc. (COGT) for $10.50 per share in a deal worth $943 million.
The transaction, which will expand 3M's ability to provide biometric security solutions, is expected to close in the fourth quarter.
With the deal representing an 18% premium on Cogent's closing price of $8.91 in Friday's session, the stock is up sharply in pre-market action. Shares are trading at $10.70, up $1.79 or 20.02% from Friday's close.
"Adding Cogent Systems' products to our business strengthens our product portfolio and services in high security credential issuance and authentication systems and positions 3M's business in law enforcement applications," Vice President and General Manager of 3M Security Systems Division, Mike Delkoski said in a statement.
Pasadena, California-based Cogent, which is also known as Cogent Systems, is a provider of finger, palm, face and iris biometric systems for governments, law enforcement agencies, and commercial enterprises. The proposed acquisition is seen to expand 3M's reach into access control and other commercial ID and authentication applications.
The acquisition will see 3M foray into the $4 billion global biometric market, which is expected to grow at more than 20% annually. Cogent Systems would be part of 3M's Security Systems Division, and its founder and CEO Ming Hsieh will remain an integral part of the combined business.
The agreement will see a subsidiary of St. Paul, Minnesota-based 3M commencing a tender offer within the next ten business days for all outstanding shares of Cogent Systems. The offer is subject to the tender of a majority of Cogent Systems' shares.
The acquisition has the unanimous approval of Cogent Systems' board and it recommends its shareholders to tender their shares to the offer. Meanwhile, Hsieh and certain entities affiliated with him have agreed to tender their shares to the offer.
"3M can accelerate our growth and extend our reach in global border control markets, law enforcement and commercial applications. Together, we'll deliver a broader range of identification and authentication solutions to the security industry and to our customers," Hsieh noted.
3M expects the transaction to be $0.09 to $0.10 dilutive to its earnings, on a reported basis, in the first year of operations after the closure of the deal. However, it is expected to be only about $0.01 to $0.02 accretive to earnings, excluding items.
For the deal, J.P. Morgan acted as exclusive financial adviser to 3M, while Credit Suisse and Goldman, Sachs & Co. acted as financial advisers to Cogent Systems.
MMM closed Friday's regular trading session at $81.00, up $0.88 on a volume of 3.45 million shares, lower than the three-month average volume of 4.34 million shares. In the past 52-week period, the stock has been trading in a range of $68.96 to $90.52.
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