The 3M Company announced on July 26th that it will spin off its health care business into a separate, publicly-traded company. The health care business will focus on wound care, oral care, healthcare IT, and biopharma filtration. The current health care business lines include bandages, skin adhesives, oral aligners, air purifiers, optical lenses, and the Bair Hugger™ surgical warming system that is currently the subject of nearly 6,000 lawsuits.
3M’s health care business generated $8.6 billion in 2021, which amounted to about one-quarter of the company’s total revenue. 3M confirmed that the non-healthcare main company will retain liability for all non-healthcare-related litigation, including the Combat Arms Earplugs litigation and PFAS litigation.
3M expects the move to increase the companies’ agility and focus to better position both companies for long term success and ability to tailor capital allocation strategies. In discussing the proposed move, 3M chairman and chief executive officer Mike Roman stated:
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.
This move comes off a string of similar moves from multi-national conglomerates, including General Electric Co.’s separation of its power, aviation, and healthcare businesses; Johnson & Johnson’s spin-off of its consumer health company; and United Technology’s spin-off and subsequent merger with Raytheon. The trend towards spinning off various businesses within these conglomerates comes as consensus grows among investors that businesses perform best when streamlined, according to Reuters.
