3M agrees to buy Cogent in $900m deal

City A.M. Reporter
DIVERSIFIED US manufacturer 3M said it would buy Cogent for $943m (£610m), paying a nearly 18 per cent premium for the maker of identification systems used to screen travellers at border crossings.

3M said it would pay $10.50 a share. Cogent shares jumped 22 per cent to $10.90 in unusually heavy trading, topping the offer price, suggesting the market considers a rival bid possible. 3M shares were down $1.00 at $80.00.

Cogent makes automated fingerprint and palmprint identification systems -- called biometrics -- that allow its customers to capture fingerprint and palm print images electronically.

Analyst Josephine Millward of Benchmark said the deal values Cogent at about 6.6 times estimated 2011 earnings before special items, whereas other deals in the homeland security and defense sectors have produced multiples of at least eight. She said other bidders may emerge.

Potential rival bidders include information technology services companies and systems integrators such as Danaher and Computer Sciences, as well as Lockheed Martin and Northrop Grumman, Millward said She rates Cogent shares “buy,” with a $14 price target.

3M makes systems for creating and validating documents like passports, as well as technology used at national borders. It said the deal will help it expand in the market for law enforcement systems.