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3M Wasting Time With Federal Signal Tech Purchase

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By Jon C. Ogg Updated Published
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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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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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