Subscribe to receive updates on US & Canadian companies for free.
Start your day with the latest news on US & Canadian companies by subscribing to our myFT Daily Digest email.
Jay Powell, as the chair of the Federal Reserve, has taken on the crucial responsibility of resolving “mass torts,” major civil lawsuits. Recently, 3M, a US conglomerate, announced its agreement to settle approximately 260,000 legal claims, which may be influenced by the higher rates set by Powell. These claims allege that 3M subsidiary Aearo sold defective earplugs to the US armed services. The settlement, totaling $6 billion in cash and stock, aims to avoid protracted jury trials caused by the current mass tort system. With current interest rates high, plaintiffs and their lawyers have recognized the advantageous timing to maximize their negotiation leverage and 3M’s available funds.
3M’s attempt to streamline the litigation process by placing Aearo into Chapter 11 bankruptcy faced controversy and was eventually dismissed by a judge in June due to the lack of required financial distress. The summer has been marked by settlements for 3M, including a payment of $10.5 billion to $12.5 billion to US municipalities over PFAS, also known as “forever chemicals,” linked to cancer.
Despite a 40% decline in 3M shares since the beginning of 2022, the company still maintains an enterprise value of $70 billion. Analysts and investors are now questioning when the stock will regain its attractiveness. However, the structured settlement payments for Aearo and PFAS pose a potential threat to 3M’s dividend, which currently yields six percent. 3M plans to address this by separating its healthcare products business and borrowing to pay a $7 billion dividend back to its parent company.
Compared to Johnson & Johnson’s creation of a subsidiary for talc liabilities, 3M has faced less criticism, as Aearo has always been a genuine business within the company. Product liability victims now understand the costly nature of prolonging cases, especially as the time value of money increases.
For more insights on the world of mergers and acquisitions, subscribe to the FT’s Due Diligence newsletter here.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
