The transaction is valued at $670 million net of the target's cash and debt.

The Costa Mesa, Calif.-based target makes ceramic parts for the automotive, oil and gas, industrial and defense sectors. It has an annual revenue of about $500 million and holds operations in the U.S., Canada, China and Germany.

Ceradyne will become part of 3M's energy and advanced materials division after the transaction is completed by the end of the fourth quarter. 3M will begin a tender offer for the majority of Ceradyne's shares within 10 business days. Ceradyne's board has approved the deal and has recommended that its shareholders do the same.

"Ceradyne is an excellent complement to our existing businesses in transportation, energy markets and defense," said Chris Holmes, executive vice president of 3M's industrial and transportation business.

St. Paul, Minn.-based 3M expects the acquisition to add about five cents per share in the first full year after the transaction is completed.

"This is a great fit and I know that advanced ceramics technologies have a tremendous future within 3M and can contribute to the development of unique solutions for many demanding applications," added Ceradyne CEO Joel Moskowitz in a statement.

Monday's announcement comes less than a month after the Department of Justice said it would challenge 3M's offer to purchase Avery Dennison Corp.'s office and consumer products division for $550 million over antitrust concerns. The DOJ claimed that acquisition would give 3M more than a 80% U.S. marketshare in the labels and sticky notes market.

In June, 3M acquired Federal Signal Technologies LLC, also known as FSTech, from Federal Signal Corp. for $110 million in cash. FSTech makes software for electronic toll collections.

For the Ceradyne deal, 3M received financial advice from Credit Suisse AG.

Citibank NA advised Ceradyne.

Kirkland & Ellis LLP's Daniel Wolf and Joshua Zachariah represented Citibank.

3M shares opened 50 cents higher, to $92.91, on Monday, giving it a market capitalization of around $64 billion.

Meanwhile, Ceradyne's stock soared 43% higher $34.92 on the open, with its market cap near $845 million.