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3M pays the most extensive mass tort case ever

August 30, 2023: 3M is on the verge of completing the most critical mass tort litigation in U.S. history, but it’s still satisfying other expensive legal headaches.

On Tuesday, the company agreed with 250,000 plaintiffs in a $6.01 billion deal. Military veterans and service members alleged that 3M manufactured defective earplugs that resulted in hearing loss.

“I am confident that this $6 billion settlement will receive full and overwhelming support, not just because it holds 3M accountable, but more importantly because it has just and deserved compensation to our veterans,” Bryan Aylstock, the court-appointed lead plaintiffs’ counsel, told.

While news of the settlement loosens one big legal overhang, 3M is still awaiting approval of its $10.3 billion settlement with water utilities over drinking water contaminated with substances known as “forever chemicals.”

That settlement, facing pushback from more than 20 states, only covers a subset of liabilities and does not include a growing list of states that have sued 3M. Nor does it contain personal injury claims.

3M has also faced lawsuits from nations such as the Netherlands and Belgium over PFAS contamination. Europe continues to weigh a decision on whether to ban PFAS chemicals altogether. In the U.S., the Environmental Protection Agency is considering labeling PFAS as a hazardous chemical. That could lead to more testing and a better understanding of how pervasive the toxic chemical is.

To fund its settlements, 3M has slashed costs by eliminating 8,500 jobs, or 10% of its workforce, this year.

The industrial plans to spin off its high-performing healthcare business by the end of 2023 or early 2024. JPMorgan analyst Stephen Tusa expects that transaction to bring $7 billion to $9 billion in cash flows for 3M.

Much debate has been centered around 3M’s dividend, which pays investors 6.1%. JPMorgan, UBS, and RBC are among the Wall Street firms that have mentioned that 3M’s tip is at risk. “We expect that 3M will lower the dividend following the spin-out of the Healthcare unit,” UBS analysts said in a note on Monday.

The timeline for the business transaction is on track, with 3M announcing in the previous week that Zimmer Biomet CEO Bryan Hanson will be joining the firm as CEO of its healthcare business.

That announcement revealed that current Chief Financial Officer Monish Patolawala added president to his title. In a note to clients, RBC analyst Deane Dray said, “This arguably positions him as the heir-apparent to CEO Mike Roman.”

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