3M is parting ways with its healthcare unit
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You never know if a spin-off will end up being a hit like Law & Order: Special Victims Unit, Fraserand You better call Saul or a trivial question like Joey, that 80’s show, and Joanie likes Chachi.
On Tuesday, US manufacturing conglomerate 3M became the latest company to dabble in the concept, announcing it would turn its healthcare unit into a public company. In the corporate world, the goal is to increase shareholder value, of course, the Wall Street ratings version.
With 60,000 products ranging from electronics to dental adhesives to Post-its, Minneapolis-based 3M offers more variety than your local Baskin Robbins. But the wide range of product lines has left the company exposed to supply chain delays and inflation, with rising costs weighing on profits. In June, CEO Mike Roman admitted it was a “mistake” when the company downplayed rising costs earlier this year, which could end up reaching $350-450 million this year.
Then there’s 3M’s Aearo Technologies subsidiary, which said Tuesday it was filing bankruptcy and paying $1 billion into a trust to settle claims for 290,000 active-duty service members and veterans who allege hearing damage. because of inferior Combat Arms earplugs.
The healthcare unit spin-off will help 3M simplify its corporate structure as it charts a path forward:
- The healthcare unit made $8.6 billion in revenue last year, nearly a quarter of 3M’s revenue. The division makes surgical supplies, bandages, skin adhesives, oral aligners, air purifiers, optical lenses and more – 3M will retain 19.9% in the business, which according to Bloomberg Intelligence analysts, could be worth up to $45 billion, and will sell it fades over time.
- The health care unit, however, is mired in its own legal disputes, or rather 6,000 of them. Its Bair Hugger surgical warming system is the subject of nearly 6,000 lawsuits related to surgical site infections.
The second time: 3M, already in the process of splitting off its food safety unit so it can merge with Neogen, expects the healthcare unit to be independent by the end of next year.
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