Sean Gallup
Solventum’s (NYSE:SOLV.WI) shares on Wednesday started trading on a when-issued basis at an initial price of $80 each. Its spinoff from 3M (NYSE:MMM), the maker of Scotch tape and Post-it Notes, will be completed on April 1.
The initial price translates into a valuation of about 13 times estimated earnings of $6.10 to $6.40 a share for 2024, columnist Al Root of Barron’s writes.
The multiple is lower than the average for large-cap stocks that make up the Standard & Poor’s 500 stock index (SP500) at 20.5 times estimated earnings for 2024. The valuation multiple also is lower than for peer companies such as Becton Dickinson (BDX), Baxter International (BAX) and Dentsply Sirona (XRAY).
“Some discount isn’t all that surprising,” Root says. “Solventum (SOLV.WI) 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 (MMM) shareholders receive one share of Solventum (SOLV.WI) for every four shares of 3M (MMM).