* Weak economy makes M&A targets more attractive
* Slowing gradual, not dramatic, Honeywell CEO says
* 3M chief calls long-term growth goal a "stretch target"
By Scott Malone
BOSTON, Sept 19 The chief executives of 3M Co
and Honeywell International Inc said the grim
global economic outlook is whetting their appetite for
When organic growth opportunities slow, major U.S. companies
typically turn to buying other businesses as a way of quickly
boosting their revenue.
Honeywell CEO Dave Cote on Wednesday suggested that the
uncertain economy has led some potential takeover targets to
entertain lower-priced offers from his Morris Township, New
"When times are bad and everybody is uncertain about the
future, that is the right time to buy," Cote told investors from
Boston. "You don't' want to buy when everybody is saying, 'Wow,
things are great, this is a good time to do it,' because you're
probably catching things on the peak."
Inge Thulin, who took over as CEO of 3M in February, told
investors that sellers' price expectations had declined. He said
he was likely to pursue larger acquisitions than his predecessor
George Buckley had, though he held to the company's target of
doing $1 billion to $2 billion worth of takeovers per year.
"You will see fewer but more strategically important" deals,
said Thulin, whose company makes a broad range of products from
Post-It notes to films used in television screens. "They should
be a little bit more sizable."
The company has not given up on its effort to acquire
Avery-Dennsion Corp 's office products businesses,
despite U.S. antitrust objections, 3M executives added.
GRIM GLOBAL ECONOMY
Europe's continued slump and weakening demand in Asia stood
out as the two executives' main concerns.
Thulin said 3M's long-standing goal of growing sales by 7.0
percent to 8.0 percent a year, factoring out the effects of
acquisitions and currency fluctuations, looked like a "stretch
target" in the current economy.
"The market has changed since that target was put in place.
It was done in a different economic environment," Thulin said.
"Now it's a stretch target in a way and in 3M we have an
organization that responds very well to stretches."
Honeywell's Cote said that in recent months the global
economy had grown slightly weaker, though the maker of
building-control systems and cockpit electronics has not seen
any sharp changes in demand.
"This is more of a steady degradation," Cote said.
Honeywell believes the company will continue to grow sales
despite the overall sluggishness, Cote told investors. "Next
year, I think sales will generally be up, but it's not going to
be anything that's exciting."
Investors have grown warier about company's prospects in the
past few months, with the companies in the widely watched
Standard & Poor's 500 index now expected to post a 2.1
percent collective profit decline in the third quarter, down
from forecasts that called for 3.1 percent growth when the
calendar quarter began on July 1, according to Thomson Reuters
The view is not quite so dark for Thulin and Cote's sector,
though. Analysts look for industrial companies to record 4.7
percent earnings growth in the quarter, though that is down from
an earlier 10.1 percent growth forecast.
EUROPE IS THE BIG WORRY
Europe, gripped in a debt crisis, remains corporate
America's main worry, executives said.
"The European market is mixed. Northern Europe continues to
be robust ... southern Europe clearly is depressed and a whole
different story," said Carlos Cardoso, CEO of U.S. tool and
engineering company Kennametal Inc.
That weakness has hurt the Latrobe, Pennsylvania-based
company's sales, Cardoso told investors in New York.
"The first quarter is coming slightly below what we
expected," he noted. Analysts had expected to rise about 5.5
percent in the company's first fiscal quarter, which ends Sept.
All three companies' shares had muted reactions to the
comments from executives on Wednesday. 3M was up 32 cents at
$93.75, Honeywell was down 31 cents at $61.08 and Kennametal was
up 1 percent to $38.98, while the S&P 500 was essentially