Federal Signal Corp. (NYSE: FSS) is surging on news that 3M Co. (NYSE: MMM) is going to acquire the company’s technology business called FSTech. The deal is only $110 million in cash, but it added 18% to Federal Signal shares as its market cap was under $300 million before the deal was announced. Obviously this is good for Federal Signal, but what we cannot get a handle on is exactly why 3M is bothering with this.
3M Co. (NYSE: MMM) is seeing shares down 0.8% at $86.83 at the end of the day. Here is why we think this is a waste of time: 3M has a market value of $60.3 billion. This acquisition of Federal Signal’s Oak Brook, Illinois-based unit is into intelligent transportation solutions and it makes electronic toll collection and it offers parking management hardware and software services. So, how much can $110 million move the needle for a $60 billion company?
3M generated $29.6 billion in sales in 2011 and the company has raised its dividend every year for as long as memory serves. Maybe 3M feels that because of Federal Signal’s long-term declining share price that it is getting a great deal. Still, it is just hard to imagine that this intelligent transportation solutions unit can move the needle very much.
JON C. OGG
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