(RTTNews) - 3M (MMM) on Tuesday announced that Aearo Technologies and related entities, its wholly-owned subsidiaries, have voluntarily initiated chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Indiana. The entities are seeking court supervision to help establish a trust, funded by 3M, to resolve all claims determined to be entitled to compensation in respect of Combat Arms Earplugs.
The move is in the context of the large number of claims related to the previous generation Combat Arms Earplugs manufactured by Aearo Technologies, as well as discontinued Aearo Technologies mask and respirator products utilized to reduce workplace exposure to asbestos, silica, coal mine dust or occupational dusts.
Both 3M and Aearo Technologies believe the Combat Arms Earplugs were effective and safe when used properly. However, the increasing litigation, including approximately 115,000 filed claims and an additional 120,000 claims on an administrative docket as of June 30, 2022 have prompted the move.
3M has committed $1 billion to fund the trust. In addition to this, 3M has committed $240 million to fund projected related case expenses. 3M would be providing additional funding if required.
3M has recorded a total pre-tax charge of $1.2 billion, or $1.66 per share, and reflected it as an adjustment in arriving at its results, adjusted for special items.
3M and its other businesses have not filed for chapter 11 and would continue to operate as usual.
Aearo Technologies, which was acquired by 3M in 2008 and has since operated as its wholly-owned subsidiary, would also continue to operate in the ordinary course. Aearo Technologies has indemnified 3M for obligations related to the claims.
In conjunction with the chapter 11 process, Aearo Technologies would file the customary first day motions with the bankruptcy court seeking authority to continue operating in the normal course of business, without interruption or disruption to its customers, vendors, and employees.
Kirkland & Ellis LLP is serving as legal counsel and AlixPartners LLP is serving as restructuring advisor to Aearo Technologies. PJT Partners is serving as financial advisor and White & Case LLP is serving as legal counsel to 3M.
Shares of 3M Company are currently trading in pre-market at $139.75, up $5.63 or 4.20 percent from the previous close.
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