What 3M's Health Care Spin-Off Means to Investors
3M's (NYSE: MMM) spin-off announcement last month caught the market by surprise and inevitably raised comparisons with General Electric's (NYSE: GE) impending breakup. Both companies plan to spin off their healthcare businesses in 2023 (with GE also planning to spin off its power and renewable energy businesses together in 2024) to unlock value for shareholders. Let's look at 3M's plans and what they mean for the investment case for the stock.
Management plans the following:
It's an aggressive move, and the rationale appears obvious: Spin off the healthcare business and release the value locked into a business that's being derated because of the industrial businesses at 3M. As such, 3M shareholders will receive the full value of the business, and it will be better run by more focused management. Moreover, the strength of the healthcare business will enable it to have its own capital structure, and it's likely to find it easier to raise money for investment. It's pretty much the same playbook that GE is running for its healthcare spinoff.
Source Fool.com
