3M, the maker of Post-it notes and face masks, is to spin off its healthcare unit, becoming the latest conglomerate to break itself up in a bid to unlock value.
The split comes as 3M potentially faces billions of dollars in liabilities over military-grade earplugs it manufactures. More than 100,000 US military veterans have sued the Minnesota-based company, claiming that their hearing has been damaged because of allegedly faulty earplugs.
3M’s move comes after a number of well-known global companies, including consumer brand Kellogg, industrial group General Electric and healthcare conglomerate Johnson & Johnson, announced plans to spin off parts of their businesses.
The companies say the spin-offs allow them to focus on individual businesses that could grow faster alone than they could as part of a broader group.
3M’s healthcare unit, which focuses on oral care, healthcare IT and biopharma filtration, generated $8.6bn in sales last year. The remaining company, which generated revenues of $26.8bn last year, will continue to focus on its traditional business, including office supplies.
“Today’s actions advance our ability to create value for customers and shareholders,” said 3M chair and chief executive Mike Roman.
“The decision to spin off our healthcare business will result in two well-capitalised, world-class companies, well positioned to pursue their respective priorities.”
Founded as the Minnesota Mining and Manufacturing Company in 1902, 3M spans products from sandpaper to Scotch tape and has long touted the advantages of sharing scientific expertise between its diverse divisions.
GE said last November that it would become three new public companies focused on healthcare, energy and aviation by 2024. On Tuesday it said it had incurred “separation costs” of about $207mn in the second quarter as it moved towards the three-way split .
3M separately said on Tuesday that Aearo Technologies, the unit that made the earplugs, had filed for Chapter 11 bankruptcy proceedings and it had set aside $1bn to fund a trust to resolve all claims that were entitled to compensation.
The company added that it believed “the Combat Arms Earplugs were effective and safe when used properly, but nevertheless face increasing litigation” and that it wanted to “achieve an efficient and equitable resolution, reduce uncertainty and increase clarity for all stakeholders, while reducing the cost and time that could otherwise be required to litigate thousands of cases.”