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Manufacturing and industrial giant 3M has announced it will create a separate spinoff of its healthcare unit.
3M revealed plans on Tuesday to spin off its healthcare business into a separate publicly traded company. According to 3M, the new business will focus on many health-related services, including wound and oral care, healthcare IT, and biopharma filtration. These services will be responsible for providing a slew of products such as bandages, skin adhesives, oral aligners, air purifiers, and optical lenses.
According to 3M, spinning off its healthcare business will ensure the creation of long-term value for the company. Furthermore, the healthcare spinoff also means that there would now be two reputable companies, each pursuing its own growth plans. According to a recent official press release:
“The New 3M will remain a leading global material science innovator serving customers across a range of industrial and consumer end markets.”
Also speaking on the development, 3M chairman and chief executive officer Mike Roman said:
“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.”
3M Healthcare Spinoff Accompanies Company Q2 2022 Financial Statement
The announcement of a standalone healthcare outfit by 3M comes alongside its Q2 2022 earnings report. The American multinational conglomerate corporation posted adjusted earnings per share of $2.48 on revenue of $8.7 billion. This was enough to surpass the general consensus estimates of $2.42 per share and revenue of $8.58 billion for the same period. Following the encouraging results, 3M shares were up around 3% in premarket trading.
Expected to be completed by the end of 2023, the 3M healthcare spinoff deal will be tax-free. However, the deal’s conclusion is subject to final approval from the company’s board as well as regulators. Following completion, 3M will retain a 19.9% stake in the new healthcare unit, to be monetizable over time.
Serving as financial advisors on the initiative are leading banking institutions Goldman Sachs & Co and PJT Partners. In addition, Wachtell, Lipton, and Rosen & Katz will serve as legal counsel.
3M’s healthcare products realized more than $8 billion in sales in 2021, most likely the impetus for the projected standalone company. Furthermore, the multifaceted disparate brand-producing company is also simultaneously spinning off its food safety business.
3M Food Safety Business
According to reports, 3M’s food safety unit will merge with industrial solution provider Neogen to improve revenue growth opportunities. As a result of the impending merger, 3M’s food safety outfit is expected to be divested by September.
Speaking on this initiative, Neogen’s chief executive officer John Adent explains that it doubles the company’s size. In addition, Adent also suggests that Neogen will have an additional customer range, saying that “it really allows them [us] to reach more customers more often with an unparalleled product offering.”
Adent also lauds the merger with 3M’s food safety unit as one that will help drive innovation on emerging technologies such as the blockchain.