3M purchase of FSTech will create new tolling super power

A little more than two years since it was established, the Federal Signal Technologies Group (FSTech) of Federal Signal Corp is to be acquired by 3M in a US$110 million cash deal, subject to post-closing adjustment. FSTech was set up in March 2010 following Federal Signal’s acquisitions of Idris, PIPS, Sirit and VESystems. According to toll roads expert Peter Samuel, editor of www.tollroadsnews.com, the new company will create a serious challenger in the USA to Kapsch, Transcore, Xerox and others.

“The sale was initiated by Federal Signal, which approached a number of companies about the sale of FSTech,” Samuel said. “3M’s was the best offer they got, but they take a loss on what they paid to buy them. Plus they have not made money in the years Federal Signal operated them.”

“Electronic tolling and parking are key adjacencies to 3M’s offering for motor vehicle systems and services,” commented John Houle, vice president and general manager, 3M Traffic Safety Systems Division. “FSTech will complement 3M’s offerings for the Department of Transportation, the Department of Motor Vehicles, toll authorities, and law enforcement agencies, and expand on our core traffic products for motor vehicles and roadways, and license plate validation materials.”

FSTech’s technologies come from its five business units: Idris – vehicle detection and classification solution; PIPS – fixed and mobile automatic license plate reading hardware and software; Federal APD – parking management and fare collection solutions; Sirit – active and passive RFID transponders and readers; and VESystems – toll account management and violation processing software and services.

“3M’s expertise and innovation in the traffic industry make it a natural choice to continue to build this important business for our customers and for drivers everywhere,” said Dan McGurran, director, 3M Motor Vehicle Systems and Services.

On a GAAP-reported basis, 3M estimates the acquisition to be US$0.02 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated integration expenses, 3M estimates the acquisition to be neutral to earnings over the same period.

The transaction is expected to be completed in the second half of 2012, subject to customary approvals and closing conditions.

22 June 2012