Analyst Note| Joshua Aguilar |
We've now reviewed the impact of a United States bankruptcy court denying 3M's request for a preliminary injunction seeking a temporary halt of its Combat Arms Earplugs litigation. Consequently, we are removing any probability 3M will be ultimately successful from using Chapter 11 of the code, and its Aearo Technologies subsidiary, to quickly settle these cases via a settlement trust. That said, there is no impact to our $183 fair value estimate. The lower stock price, which is baked into our share repurchase assumption, more than offset eliminating the incremental $800 million or so benefit from a probability-adjusted, successful ruling in 3M's favor. We point out that from our understanding, Chapter 11 proceedings generally have a low probability of success anyhow, and since 3M lost the injunction, we no longer think it's worth awarding 3M any incremental benefit from what we now believe has become a highly unlikely appeal in 3M's favor.