3M’s Healthcare Spinoff Solventum Stock Is Trading. Here’s What It’s Worth.
Shares of Solventum, 3M’s soon-to-be-spun-off healthcare business, are trading. The initial price was $80.
The spinoff will be completed on April 2. The shares became available to trade on Tuesday on a when-issued basis.
Shares of soon-to-be spun companies sometimes trade before the shares are delivered into brokerage accounts, otherwise known as when-issued trading. Volumes are typically low, but the early trades give investors an initial look into valuation.
Shares were at $79.60 in midday trading Wednesday, down about 0.5% on a volume of about 123,000 shares. That means roughly $10 million dollars have exchanged hands, a relatively small volume. The value of 3M shares traded on an average day tops $500 million.
At current levels, Solventum shares are trading at about 13 times projected 2024 earnings. The company expects to generate earnings per share between $6.10 to $6.40 this year.
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It’s a modest multiple. The
trades for about 20.5 times estimated 2024 earnings. Comparable healthcare companies
Baxter
,
and
trade for 18 times, 14 times, and 16 times, respectively.
Some discount isn’t all that surprising. Solventum is new and operating profit hasn’t grown in a couple of years. Still, the 3M healthcare franchise has its strengths—operating profit margins are North of 20%.
3M shareholders are receiving one share of Solventum for every four shares of 3M held. That ratio means that the value of Solventum in 3M stock is currently $20 a share.
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It also means the rest of 3M’s business is effectively trading for roughly $84 a share. Shares of 3M were up 1.5% in midday trading at $104.18 apiece. That leaves the non-healthcare portion of 3M trading for roughly 10 times earnings. Wall Street will have to adjust 3M estimates and back out Solventum numbers.
The rest of 3M’s business—including transportation, industrial, consumer, and electronics franchises—generated more than $24 billion in 2023 sales along with about $4.8 billion in operating profit.
Today, before the spin is complete, 3M stock trades for about 11 times estimated 2024 earnings.
Soon, the value of Solventum will be deducted from the value of 3M stock. The 3M stock chart won’t show a drop of roughly $20 a share when the spin is completed. That way, investors can track the performance of 3M shares without having to remember what happened in April 2024.
Coming into Wednesday trading, 3M stock has risen 1% over the past 12 months, trailing the
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by about 32 percentage points.
Legal liabilities and a slowing economy have weighed on investor sentiment. 3M is working on two issues involving chemicals it produced that have been found in water supplies, as well as potentially faulty earplugs sold to the military.
Write to Al Root at allen.root@dowjones.com
