Corning Splashes $900M on 3M's Comms Biz

Optical equipment maker Corning is to splash $900 million in cash on a takeover of 3M's communications market business as part of an acquisition strategy aimed at broadening its product portfolio.

The 3M assets being acquired, which include a broad range of optical fiber and copper passive connectivity products (xDSL, FTTx, structured cabling and more) as well as system integration services in some markets, generated about $400 million in revenues in 3M's most recent financial year. The communications market business includes a headquarters in Austin, Texas, as well as manufacturing and operational facilities in France and Germany. About 500 3M staff are set to join Corning when the deal closes, which is expected in 2018.

In a statement, Corning Inc. (NYSE: GLW) said the deal would bolster its international presence as well as its range of products. "It also provides new co-innovation opportunities and enhances our ability to serve customers globally," said Clark Kinlin, Corning's executive vice president. "As the industry's only true end-to-end manufacturer and supplier of optical solutions, we look forward to bringing these two strong organizations together and welcoming a group of outstanding employees."

Corning says the enterprise value of the transaction works out at just seven times the annual adjusted EBITDA of the 3M assets. The deal is also expected to add between $0.07 and $0.09 to Corning's earnings per share.

Corning generated EPS of $1.55 last year, up from $1.40 in 2015, with overall sales rising from $9.1 billion to $9.4 billion over that period.

Its revenues have continued to rise this year thanks to growing demand for its optical equipment from customers in various sectors. Its toughened glass products, sold under the Gorilla Glass brand, are used throughout the consumer electronics market, for example.

In Corning's third quarter, sales were up 4%, to about $2.6 billion, compared with the year-earlier quarter, with net income rising 37%, to $390 million.

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Corning has already been highly visible on the deal-making and acquisition fronts this year. In April, it landed a high-profile $1 billion contract to provide fiber optic cable to US telco giant Verizon. Under that agreement, Verizon Communications Inc. (NYSE: VZ) is to buy up to 20 million kilometers of optical fiber annually from Corning between 2018 and 2020.

Then, in July, Corning snapped up a small cell specialist called SpiderCloud, which now forms a part of its optical communications segment. (See Corning Buys Business Small Cell Specialist SpiderCloud.)

Corning has indicated that it will invest between $1 billion and $3 billion in acquisitions under its growth strategy. At its optical communications segment -- its biggest in sales terms -- it aims to grow revenues from about $3 billion in 2016 to $5 billion in 2020.

Sales from that business soared 15% in the third quarter, to $917 million, thanks to "strong demand for both enterprise and carrier products." Net income was up by the same percentage, to $102 million.

Corning is guiding for a "high single digit percentage" increase in sales at the division in the current quarter.

— Iain Morris, News Editor, Light Reading

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