3M (NYSE:MMM) plunged in trading following the announcement of its $10.3 billion settlement with the U.S. public water suppliers in the PFAS chemicals case. Simultaneously, the company finalized the spin-off of its healthcare business, marking a significant milestone for the industrial conglomerate.
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What is the PFAS Chemicals Case?
PFAS (per- and polyfluoroalkyl substances), also known as ‘forever chemicals,’ are extensively used in a range of products, from non-stick pans to clothing, and have been linked to causing cancer and other diseases. The lawsuit was among thousands that have been filed against companies like 3M, Corteva (NYSE:CTVA), and DuPont (NYSE:DD) alleging water contamination with PFAS.
This landmark agreement will provide support to public water suppliers in detecting PFAS.
Settlement Agreement
The company stated that the agreement had been finally approved by the U.S. District Court in Charleston, South Carolina, and was finalized on Friday. As a part of this agreement, the industrial conglomerate has recorded an accrual of $10.3 billion.
These payments reflect the pre-tax present value of the payments over 13 years. They will start in the third quarter of this year “provided there are no pending appeals of the final approval order.” The settlement schedule projects a nominal cap of $12.5 billion in pre-tax payments, starting with the first year at $0.1 billion in Year 1 and rising to $2.9 billion in 2024. The payments will decline annually to $0.2 billion from 2034 to 2036.
Solventum Spin-Off
In a separate announcement, 3M completed the spin-off of its healthcare business, Solventum. Solventum is now listed on the New York Stock Exchange as SOLV. The company’s Board of Directors approved the spinoff last month.
As a part of this spinoff, 3M stockholders will receive one Solventum share for every four 3M shares held on March 18, 2024, the record date for the distribution. The company has retained 19.9% of the outstanding shares of Solventum common stock following the spin-off.
Is 3M a Good Stock to Buy?
Analysts remain sidelined about MMM stock with a Hold consensus rating based on one Buy and Sell each and seven Holds. Year-to-date, MMM stock has declined by more than 10%, and the average MMM price target of $112.56 implies an upside potential of 22.4% at current levels.
