By Dhirendra Tripathi
Investing.com – Neogen Corporation stock (NASDAQ:NEOG) surged 6% Tuesday as the company agreed to merge with 3M's (NYSE:MMM) food safety business.
The combined entity is likely to be worth $9.3 billion, including debt, and have annual revenue of around $1 billion. 3M will receive $1 billion from the deal. The company’s stock was up 1%.
The Wall Street Journal first reported the deal.
3M shareholders will own 50.1% of the new entity while Neogen’s will have 49.9% of it. The transaction is expected to close by the end of September.
Cost-savings from the deal, expected to kick in by the end of year three following the close of transaction, are expected to improve the new company’s margins. Neogen is also expected to benefit from its exposure to highly profitable food safety categories that 3M will hand it over.
The deal is structured as a Reverse Morris Trust, a tax-efficient way for companies to spin off a division. 3M's food safety business will be spun-off or split-off to its shareholders and simultaneously merged with a wholly-owned subsidiary of Neogen.
Neogen’s management team will run the combined company.