3M Co. has agreed to pay more than $6 billion over five years to resolve hundreds of thousands of lawsuits alleging it sold defective ear plugs to the US military that led to hearing damage for combat troops.
(Bloomberg) — 3M Co. has agreed to pay more than $6 billion over five years to resolve hundreds of thousands of lawsuits alleging it sold defective ear plugs to the US military that led to hearing damage for combat troops.
3M will contribute $5 billion in cash and $1 billion in 3M common stock through 2029 under the terms of the agreement, the company said Tuesday in a statement. 3M said it would record a third-quarter pretax charge of about $4.2 billion, on top of the $1.1 billion it has already allocated for the claims.
3M rose by less than 1% in pre-market trading Tuesday. Shares had fallen 13% this year through Monday’s close.
The deal resolves a major source of uncertainty for 3M investors who’ve watched the company’s market value decline by more than half since 2019 amid fears over staggering legal liabilities from the earplug claims and lawsuits over so-called forever chemicals.
“This historic agreement represents a tremendous victory for the thousands of men and women who bravely served our country and returned home with life-altering hearing injuries,” Bryan Aylstock, a Florida-based attorney for plaintiffs in the earplug cases, said in an emailed statement.
More than 300,000 former US service members and others have filed suits that were consolidated into a multi-district litigation case in federal court in Florida. Attorneys’ for the plaintiffs said that not all cases will qualify for compensation under the deal. Thousands of cases are expected to be dismissed as part of the settlement.
“This agreement, reached through the mediation process that 3M has previously disclosed, is structured to promote participation by claimants and is intended to resolve all claims associated with the Combat Arms Earplug products,” 3M said in a statement on Tuesday.
Analysts at Barclays had pegged the company’s potential liability at about $8 billion. Bloomberg Intelligence calculated it could be as much as $9.5 billion.
While the settlement was at the low end of estimates, “it may accelerate negative rating activity as S&P and Moody’s have not fully accounted for the legal overhangs,” BI analysts Joel Levington and Michael Doto wrote Monday.
The deal still must be approved by US District Judge US District Judge Casey Rodgers in Pensacola, Florida. The accord’s terms say 3M can walk away if less than 98% of eligible earplug plaintiffs don’t participate in the settlement, according to securities filings.
The earplugs case is In Re 3M Products Liability Litigation, 19-md-2885, US District Court, Northern District of Florida (Pensacola).
(Updates with walk-away provision in ninth paragraph)
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