Special Situation – Buy 99 Shares of MMM – Expected profit: 7.5% / $1,000
August 4, 2022
MMM: $144.24
Recommendation: Buy 99 shares of MMM / Exchange for NEOG
Expected Profit: $1,075 (7.5%)
Timeline: 1.5 Months
Summary
I’m going to come out with a more detailed write up, but I want to share the idea now because it’s time sensitive.
3M (MMM) announced in December 2021 that it is merging its food safety business with Neogen.
The transaction is set to close on September 1, 2022. After the transaction is complete, 3M will own 50.1% of Neogen.
Neogen just disclosed that 3M will do a share exchange to distribute its shares of NEOG.
Terms of the shares exchange are as follows.
For every $100 shares of MMM that you own, you will receive $107.53 of NEOG shares.
Since this is free money, I expect the offering to be oversubscribed.
However, there is an odd lot provision such that if you own fewer than 100 shares, you will not prorated.
This offering is very similar to the many other split off/exchange offers that we’ve participated in.
Examples:
I will look deeper into Neogen, but my initial take is it looks reasonably valued/undervalued.
Standard risks apply:
- Odd lot provision could be removed (I view this as unlikely).
- MMM stock could depreciate during 30 day exchange window (I view this as unlikely)
Disclosure
Rich Howe, owner of Stock Spin-off Investing (“SSOI”), doesn’t own MMM shares as of 10am ET on 8/4/2022 but plans to buy some. All expressions of opinion are subject to change without notice. This article is provided for informational purposes. Please do your own due diligence and consult with an investment adviser before buying or selling any stock mentioned on www.stockspinoffinvesting.com.
Thanks for sharing.
As a possible additional risk I see the possible sell off of NEOG after the exange of the stocks. It means that if the sell off is bigger than 7% (with the volatility of this days, it is a plausible situation) there is no reward after this trade.
In fact, as a normal spinoff, I see a chance to make some money by buying NEOG after the exange of the shares is done.