Much like the mythical hydra, when 3M is sliced apart in the coming months, two separate companies will crop up in its place.
Following in the recent footsteps of another century-old manufacturing conglomerate, General Electric, 3M on Tuesday laid out a plan to spin off its healthcare business into a free-standing entity. The resulting public company will focus solely on 3M’s healthcare technology portfolio, which currently spans wound care, oral care, healthcare IT and biopharma filtration products.
By splitting the company in two, each of the resulting entities will be better able to “pursue their respective priorities,” according to CEO Mike Roman. For the new healthcare player, that’ll include making its own investment decisions and operating under the management of leaders with more relevant expertise.
The tax-free spinoff is expected to be completed by the end of next year. In the meantime, 3M will move forward with a previously announced plan to separate out its food safety segment from the healthcare business; that segment will combine with food safety giant Neogen in a deal that’s valued at $9.3 billion and is currently on track to close in September.
Once the healthcare business has left the nest, the remainder of the Minnesota-based manufacturing giant—currently referred to as New 3M—will hold on to a stake of just under 20% in the new standalone company, with plans to sell off that stake over time.
Sans the food safety division, 3M’s healthcare business raked in about $8.2 billion in sales last year. Quarterly results (PDF) released alongside the spinoff announcement showed that the business may be on track to earn even more this year, with net sales for the first half of 2022 registering about 2% higher than the same period in 2021.
After the healthcare spinoff is complete in 2023, the so-called New 3M will encompass the company’s three remaining segments: safety and industrial, transportation and electronics, and consumer products.
Offerings from those divisions run the gamut from Scotch tape, Post-it notes and cleaning supplies to car repair kits, power tools and roofing materials. Altogether, they brought in nearly $27 billion in sales last year—though, unlike the healthcare division, those three segments have all seen slight year-over-year drops in their 2022 earnings so far.
The separation announcement gave 3M’s stock a bit of a boost: It opened Tuesday morning around $143.50, about a 7% jump from Monday’s closing price.
News of 3M’s split comes shortly after GE moved forward with its own healthcare spinoff. Announced late last year, that deal will see GE’s $18 billion healthcare division also become a standalone company—and also with an expected completion date in 2023.
Just this month, GE unveiled the branding for the new company. It’ll go by GE HealthCare, retaining its progenitor’s name and logo, but with a new “compassion purple” hue.