3M into NEOG (MMM)

Category: Odd Lot Spin-Out

Current Price: $129.14 as of 8/26/21

Expected Price: $156.07  (7.3515 times NEO Share Price of $21.23) — this might be slightly lower if the maximum ratio isn’t achieved 

Max Size (for odd lot): 99 shares

Expected Timing: September 4, 2022 delivery (note August 31, 2022 deadline for tender)

Profit Potential: $2000+ as of 8/26/22

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3M has decided to spin out its food safety business to Neogen (NEOG). This presents an opportunity for odd lot holders who will likely be allowed to swap 100% of their MMM shares over to NEOG at a discount.

In general, this would be an interesting situation because a holder of MMM could swap into NEOG at a discount and make approximately $750.  However, this is more interesting because of how MMM and NEOG prices have moved during the august 25, 26, and 29 averaging period, leading to an opportunity that is much higher.

The risks are spin-off cancelation, odd lot provision cancelation, and not getting your odd lot opt-in to the broker before their deadline.  While the deal expires on August 31, brokers often have an earlier deadline in order to communicate the client’s wishes to the company. So before buying on Monday please check with your broker to see when that deadline is.

Additional information is below — this is a dynamic situation and it’s important to check with your broker to see when the last day to tender is

Documentation:  https://www.bamsec.com/filing/114036122028130?cik=711377

Most Important Excerpt: 

3M Company (“3M”) is offering to exchange all shares of common stock, par value $0.01 per share (“Garden SpinCo common stock”), of Garden SpinCo Corporation (“Garden SpinCo”) owned by 3M for outstanding shares of common stock of 3M (“3M common stock”) that are validly tendered and not properly withdrawn. The terms and conditions of this Exchange Offer (as defined below) are described in this prospectus, which you should read carefully. None of 3M, Garden SpinCo, any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in this Exchange Offer. You must make your own decision after reading this prospectus and consulting with your advisors.

The value of 3M common stock and Garden SpinCo common stock for purposes of establishing the exchange ratio for this Exchange Offer will be determined by 3M by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAP”) on each of the Valuation Dates (as defined below) of 3M common stock on the New York Stock Exchange (the “NYSE”) and Neogen common stock on Nasdaq. The “Valuation Dates” will be the last three full trading days ending on and including the second full trading day prior to the expiration date of this Exchange Offer, as it may be voluntarily extended. Based on an expiration date of August 31, 2022, the Valuation Dates are expected to be August 25, 2022, August 26, 2022, and August 29, 2022. See “Exchange Offer—Terms of This Exchange Offer.”

This Exchange Offer is designed to permit you to exchange your shares of 3M common stock for shares of Garden SpinCo common stock at a 7% discount to the per-share value of Neogen common stock, calculated as set forth in this prospectus, subject to the upper limit described below. For each $100 of your 3M common stock accepted for exchange in this Exchange Offer, you will receive approximately $107.53 of Garden SpinCo common stock, subject to an upper limit of 7.3515 shares of Garden SpinCo common stock per share of 3M common stock. This Exchange Offer does not provide for a minimum exchange ratio. See “Exchange Offer—Terms of This Exchange Offer.” If the upper limit is in effect, then the exchange ratio will be fixed at that limit. IF THE UPPER LIMIT IS IN EFFECT, AND UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU WILL RECEIVE LESS (AND YOU COULD RECEIVE MUCH LESS) THAN $107.53 OF GARDEN SPINCO COMMON STOCK FOR EACH $100 OF 3M COMMON STOCK THAT YOU TENDER.

Odd Lot Provision:

Q:	Will all shares of 3M common stock that I tender be accepted for exchange in this Exchange Offer?

A:

Not necessarily. Depending on the number of shares of 3M common stock validly tendered in this Exchange Offer and not properly withdrawn, the calculated per-share value of 3M common stock and the per-share value of Garden SpinCo common stock determined as described above, 3M may have to limit the number of shares of 3M common stock that it accepts for exchange in this Exchange Offer through a proration process. Any proration of the number of shares accepted for exchange in this Exchange Offer will be determined on the basis of the proration mechanics described in “Exchange Offer—Terms of This Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of 3M Common Stock.”

An exception to proration can apply to stockholders (other than participants in the 3M Savings Plans) who beneficially own “odd lots,” that is, fewer than 100 shares of 3M common stock. Such beneficial holders of 3M common stock who validly tender all of their shares will not be subject to proration.

In all other cases, proration for each tendering stockholder will be based on (i) the proportion that the total number of shares of 3M common stock to be accepted for exchange bears to the total number of shares of 3M common stock validly tendered and not properly withdrawn and (ii) the number of shares of 3M common stock validly tendered and not properly withdrawn by that stockholder (in each case, after taking into account any shares exchanged that constitute “odd lots”). Any shares of 3M common stock not accepted for exchange as a result of proration will be returned to tendering stockholders promptly after the final proration factor is determined.

Current Consideration:  https://www.envisionreports.com/3MNEOGENEXCHANGE/2022/3mneogenexchangeaug25/index.html?voting=true