A Flurry of Acquisitions Sends Industrials Higher
Headlines -- and stock-price movements -- in the industrials sector were dominated by companies making splashy acquisitions on Monday. Stocks broadly advanced on a report by the Institute for Supply Management that its Purchasing Managers Index, a gauge of demand for industrial products, had indicated growing purchasing activity for the first time in four months, suggesting optimism in the manufacturing sector. While the Dow Jones Industrial Average ended the day up nearly 0.6%, a few companies announcing high-profile acquisitions and mergers fared better.
The day's biggest gainer was specialty ceramics manufacturer Ceradyne, which rose 43% after the announcement that it will be acquired by diversified technology and manufacturing giant 3M (NYS: MMM) , which itself was up nearly 1% at the end of trading. 3M has a good track record of finding value in acquisitions by leveraging technology across multiple platforms, and I believe 3M paid a fair price and will benefit from the deal.
Diversified industrial manufacturer Honeywell (NYS: HON) was also up, gaining 1.8% after announcing that it will spend $525 million cash to acquire 70% of privately held natural gas processing equipment supplier Thomas Russell. The move will increase Honeywell's exposure to the booming natural gas industry, particularly in the use of natural gas as a feedstock for higher-value petrochemicals. Thomas Russell expects revenue of $425 million this year, so Honeywell doesn't expect the deal to negatively affect earnings this year.
Famously fractious Tyco International (NYS: TYC) , which was once a highly diversified multinational conglomerate, may finally have completed its decade-long quest to spin all of its segments into standalone businesses. Tyco's disintegration created medical-equipment supplier Covidien and electronics provider TE Connectivity in the first round of divestment. Over the weekend, Tyco's North American residential security business became publicly traded as ADT, and its flow control business was spun off to Tyco shareholders. The remaining business, now focused exclusively on international commercial safety and security products and services, is called Tyco Integrated Security and will keep Tyco International's ticker symbol. Shares of the new Tyco were up more than 3%.
The flow control business was immediately acquired by Pentair, as previously agreed by shareholders at both companies, with the resulting entity, Pentair Ltd. (NYS: PNR) , keeping the old Pentair's NYSE listing. The move makes Pentair the world's largest designer and manufacturer of filters, pumps, and other flow control products used in water and wastewater distribution, heat management, energy generation, mining, and other industrial processes.
Shares of Pentair were down more than 4.5%, probably because of the structure of the deal: Tyco investors automatically received shares in Pentair Ltd., so investors who remained primarily interested in Tyco's security business may have sold their Pentair shares simply to cash out. This may present a buying opportunity for those interested in Pentair's water and industrial products business.
Finally, shares of 3D Systems (NYS: DDD) advanced 3% on news that the company is buying out Dutch peer The Innovative Modelmakers, known better as TIM. Both companies are engaged in three-dimensional printing, creating unique parts and products through additive manufacturing. 3D Systems sells 3-D printing machines as well as custom on-demand products made through this process. TIM, which makes and sells custom parts, will be added to 3D Systems' rapid prototpying, model-making, manufacturing, and distribution network in Europe.
The 3D Systems acquisition highlights ongoing consolidation in a highly disruptive field. Amazon.com founder Jeff Bezos believes so strongly that 3-D printing will change the way we produce goods that he's invested millions in 3-D printing startups. The Motley Fool has put together a video report showing investors how to profit from this new industrial revolution. This report is free, but it won't be available forever, so get your copy today.
The article A Flurry of Acquisitions Sends Industrials Higher originally appeared on Fool.com.Fool contributorDaniel Ferryowns shares of Amazon.com, 3M and 3D Systems.The Motley Fool owns shares of Ceradyne and Amazon.com.Motley Fool newsletter serviceshave recommended buying shares of 3M, 3D Systems, Amazon.com, and Covidien and creating a diagonal call position in 3M. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.
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