3M Company (MMM)

Judge in FL agreeing to delay the next bellweather trial provides to me some evidence that there are some kind of legitimate negotiations going on.

The PR on 3M side has also changed...now talking about needing to know how many people are actually damaged, how bad, and what they should get.

Like they could think about valuing a settlement as enough to set up a trust for the really damaged people to go to for treatment and some kind of damage award based on scientifically determined severity - not valuing things as a hysterical, angry, emotional jury would.

Lots more I could say here, but this improves 3M chances of avoiding bankruptcy.

Now I am putting the probability of 3M BK at 70% in next 5 years.

That is down from 90% before this development.

My understanding of 3M's CAE2 related events ... Next MDL trial pushed back from end of October to February '23 by Judge Casey Rodgers. I hope this means that settlement negotiations are going well. But there are still a few very important upcoming hearings.
- 3rd circuit court to appeal bankruptcy protection for parent company; i.e. 3M. If successful, then settlement will be done by bankruptcy court as opposed to MDL jury trials/settlement. Also, J&J 7th circuit court "Texas 2-step" decision is expected this month
- 11th circuit court to appeal government contractor defense. If successful, this will cease all CAE2 MDL cases
- MDL trial appeals to reduce/overturn MDL jury verdicts

3M has pension obligations does it not?

In the UK, their central bank had to bail out the pension funds. And they did it right after they said they’d do whatever it takes to stop inflation. Boy, that had to be shortest fight against inflation in the history of the world.

It’s tough to make money in bonds when interest rates are rising.

When stocks, bonds, and real estate are all crashing, it is only a matter of time before US pension funds find themselves in the same pickle.

I said this months ago, when 3M’s earnings are shrinking, markets are crashing, and debt loads are needing of a refinance — that’s when the sheet hits the fan. The writing will be on the wall.

But if the Fed does a UK, go get yourself a wheelbarrow if you don’t have one.

My thoughts about 3M ...

The Healthcare spinoff will be 3-3.5X EBITDA, which by the end of 2023 should result in roughly $28B-32B. 3M will retain 19.9% of spinco, with the rest going to shareholders. This means 3M will net roughly $6B from this spinoff.

Given this spinoff will not occur until end of 2023, 3M will drag the CAE2 litigation settlement out to end of '23 or early '24 so that the company has the necessary funds to pay claimants. The hope is that litigation settlements will be < $6B.

Given the reduction in outstanding 3M shares after the healthcare spinoff, 3M should be able to maintain current EPS and dividend levels. While this means that 3M will be a smaller (roughly $27B revenue) company, it will only have the PFAS litigation remaining (which have mostly been settled).

So, by Q2 2024, 3M stock should once again be on a steady growth path. Just my 2 cents.