3M Plans To Spin-Off Of Health Care Business; Subsidiary Aearo Initiates Bankruptcy Proceedings

  • 3M MMM subsidiary Aearo Technologies and related entities have voluntarily initiated chapter 11 proceedings seeking court supervision.
  • 3M has committed $1 billion to fund a trust to resolve all claims determined to be entitled to compensation.
  • 3M and Aearo Technologies believe the Combat Arms Earplugs were effective and safe when used properly but face increasing litigation, including approximately 115,000 filed claims and an additional 120,000 on an administrative docket as of June 30, 2022.
  • Related3M Shares Gain As Q2 Results Exceed Street Expectation
  • Separately, 3M announced its intent to spin off its Health Care business, resulting in two public companies pursuing their respective growth plans. 
  • New 3M, with $26.8 billion in sales in FY21, will remain a global material science innovator serving diverse end markets with science and technology, manufacturing, global capabilities, and iconic brands.
  • Health Care, with ~$8.61 billion in sales in FY21, will be a global diversified healthcare technology company focused on wound care, oral care, healthcare IT, and biopharma filtration.
  • Health Care is currently expected to be spun off with net leverage of approximately 3.0x – 3.5x EBITDA and to be positioned for rapid deleveraging.
  • Additionally, New 3M expects to retain a stake of 19.9% in Health Care, which will be monetized over time.
  • The company expects to complete the transaction by year-end 2023.
  • 3M will retain responsibility for non-Health Care related litigation, including those related to Combat Arms Earplugs and PFAS.
  • Price Action: MMM shares are trading higher by 5.59% at $141.66 on the last check Tuesday.
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