New York-based Trian Partners, a high-profile hedge fund and multi-billion dollar investment management firm, is buying up shares in Minnesota’s Solventum, the spinoff of 3M’s health care business, and says its investment will push the company toward accelerated growth.
“Trian believes the company can unlock its potential through re-accelerating organic growth, restoring margins while investing to drive growth, and simplifying the company’s portfolio of businesses,” the fund’s leaders said in a statement.” Trian looks forward to engaging constructively with Solventum’s management and board.”
Solventum’s stock gained 4.6% on Tuesday on the Trian news. The company’s stock opened at $58.06 per share Friday and was up 2% in mid morning trading. The stock has increased over 7% in the past five days, but is still below the closing price on its first day of trading at $69.10 per share.
Moving forward, Trian will certainly have management’s ear about changes they are pushing.
“As a newly independent company, we are intently focused on executing our previously articulated strategy designed to accelerate revenue growth, drive margin expansion, improve free cash flow and optimize the portfolio, all of which will allow the company to reduce leverage and unlock significant value for shareholders,” said Solventum in a statement. “As a public company, we welcome shareholder feedback and look forward to engaging with Trian as we do with all of our shareholders,”
Solventum investors have already been wondering if the company has plans to streamline its business, according to analysts.
“While investors have been contemplating when and what the company can either spin or sell to improve its [weighted average market growth rate], [management] has noted that its focus over the next 24 months is debt repayment,” Vik Chopra, an analyst with Wells Fargo, wrote in a research note. “In addition, we see a multi-year turnaround ahead to address execution challenges and optimize the portfolio.”
Solventum started out as Minnesota’s newest public company in April with $8.3 billion in long-term debt. The company, which makes medical and surgical devices, dental products, health information systems and purification-filtration products., reported first quarter sales of $2 billion when it was still part of 3M’s business.
Paul Vaaler, a professor at the University of Minnesota Law School and Carlson School of Management, said it’s hard to gauge Trian’s plans, given Solventum’s short history as a standalone, publicly-traded company
“They’ve indicated intentions, but they’re pretty general,” he said.
Trian describes itself as “one of the largest shareholders of Solventum,” but its specific stake could not be determined. Trian has a reputation as an activist investor that pushes for changes to companies in which it has acquired a stake.
Trian recently challenged Walt Disney Co. in proxy battle and was trying to secure two Disney board seats, including one for its CEO and co-founder Nelson Peltz. In April, Disney shareholders voted against Trian’s proposal.
Solventum is scheduled to report second quarter financial results Aug. 8.
