2023-08-28 11:20:55 ET
3M Co (NYSE: MMM) has reportedly agreed to a multi-billion settlement with the U.S. military. Its shares opened about 6.0% up on Monday.
3M to pay over $5.5 billion to settle legal claims
The multinational conglomerate has been fighting legal claims that one of its subsidiaries – Aearo Technologies sold dangerously defective combat earplugs to the U.S. military for several years.
But it has now tentatively agreed to pay north of $5.5 billion to resolve that matter, as per Bloomberg News . According to Carl Tobias – Law Professor at the University of Richmond:
Sounds like 3M negotiated a pretty good deal for itself, give this litigation has been weighing on them for the better part of a decade.
Note that Bloomberg Intelligence expected 3M to cough up a much higher $9.5 billion to settle the said lawsuits.
3M refrains from commenting on speculation
Aearo Technologies had filed for Chapter 11 protection in 2021 to limit liability related to these legal claims – an effort that was blocked by a U.S. judge this year in June.
A representative of 3M refrained from commenting on the Bloomberg report on Monday. But Bloomberg Intelligence analysts Michael Doto and Joel Levington wrote :
It [settlement] may accelerate negative rating activity as S&P and Moody’s have not fully accounted for legal overhangs. 3M’s net leverage [pro-forma] could land between 3.3-4.2x – higher than rater’s targets.
Last month, 3M reported its financial results for the second quarter that topped Street estimates. Its shares are down about 20% versus its year-to-date high at writing.
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