3M Inc. plans to spin out its healthcare business by the end of 2023, splitting from its material science products, the company announced on Tuesday.
The standalone company will include 3M’s wound care, dental, health IT and biopharma filtration products. The segment brought in roughly $8.61 billion in revenue last year. 3M plans to keep a 19.9% stake in the company.
CEO Mike Roman said in a news release that the decision “will result in two well-capitalized, world-class companies, well positioned to pursue their respective priorities.”
Each company will have their own boards and management teams, though 3M hasn’t said who will lead the healthcare spinoff yet.
“We look at broadly where to invest in our portfolio, where acquisitions make sense, and how do we get the most value out of it, and that’s what was behind the decision to ultimately spin Health Care,” Roman said in a Tuesday investor call. “We’ve invested in strategies to create a stronger healthcare company. It’s well positioned to succeed and have a great future as a standalone company, and that really drove that decision.”
The deal is expected to be tax free, and is expected to close by the end of next year, subject to approval from the company’s board of directors and filing with the Securities and Exchange Commission. 3M is also spinning out its food safety business in a separate transaction that’s expected to close in September 2022.
3M joins several other large medtech companies that have turned to spinoffs as a strategy. Earlier this year, Zimmer Biomet spun out its spine and dental businesses into ZimVie, while Johnson & Johnson plans to shed its consumer health group and GE is preparing to shed its health unit in early 2023.
Shares in 3M closed Tuesday at $140.75, up $6.63, on the New York Stock Exchange.