3M is following suit of several other manufacturing conglomerates in divesting its Health Care business into a standalone entity, while reporting continued broad declines in sales and profit.
The St. Paul, Minnesota-based maker of PPE supplies, Post-it notes and household adhesives said July 26 that it plans to spin off its Health Care business, which had $8.6 billion in 2021 sales, or approximately 25% of 3M’s total revenue.
That divested unit will become its own publicly-traded entity focused on wound care, health care IT, oral care and biopharma filtration. 3M expects the separation to complete by the end of 2023, while the company will retain a 19.9% stake in the divested business.
“Today’s actions advance our ability to create value for customers and shareholders,” 3M chairman and CEO Mike Roman said in an announcement. “Disciplined portfolio management is a hallmark of our growth strategy. Our management team and board continually evaluate the strategic options that will best drive long-term sustainable growth and value. The decision to spin off our Health Care business will result in two well-capitalized, world-class companies, well positioned to pursue their respective priorities.”
The Health Care spin-off news comes seven months after 3M announced the $5.3 billion sale of its Food Safety business to Neogen, the company said is expected to close on Sept. 1.
3M will go forward with its three other business units — Safety and Industrial, Transportation and Electronics, and Consumer — which totaled $26.8 billion in 2021 revenue. All three segments saw second quarter year-over-year sales declines, which 3M also reported July 26. Safety and Industrial’s 2Q sales of $2.92 billion fell 3.5%; Transportation and Electronics sales of $2.27 billion fell 3.7%; and Consumer sales of $1.33 billion fell 5.0%.
Safety and Industrial’s 2Q operating profit plummeted from a $662 million gain in 2021 to a $707 million loss, nearly all driven by $1.2 billion in litigation costs stemming from thousands of lawsuits brought by veterans against the company’s subsidiary that makes military-grade earplugs. 3M simultaneously announced that the subsidiary, Aero Technologies, is seeking bankruptcy protection. The company is putting $1 billion toward a trust fund that will pay out claimants and $240 million to fund pending case expenses, as 3M will retain responsibility for that litigation.
Operating profit in 3M’s Transportation and Electronics business fell 7.2% year-over-year to $476, while profit in Consumer fell 14.8% to $247 million.
Meanwhile, 3M’s Health Care unit was the only one to see a sales uptick in 2Q. Its sales of $2.18 billion increased 0.6%, while operating profit of $494 million slipped 9.9%.
This past November, General Electric similarly announced the pending billion divestment of its GE Healthcare unit as part of a broader effort to separate the 130-year-old industrial conglomerate into three standalone public companies.