Fitch assigns Solventum BBB-

Fitch Ratings said it assigned a first-time expected long-term issuer default rating of BBB- to Solventum Corp. with a stable outlook.

The 3M Co. announced its plan to separate its healthcare business into an independent public company. The separation will occur through a pro rata distribution by 3M of at least 80.1% of the outstanding shares of common stock of a newly formed company, Solventum.

“The company's revenues are derived from a diverse portfolio of reputable brands and long-standing customer relationships, which Fitch expects will result in steady, albeit low growth revenue streams. Revenue is diversified across all of the segments by geography, customers and products,” the agency said in a press release.

However, Fitch also noted that “Several headwinds have challenged revenue and margin growth in the recent past including pandemic-related trends on elective procedure volumes, inflationary pressures, and manufacturing productivity, among others. Fitch notes that organic revenue growth between 2018 and 2023 ranged from 1% to 3%, excluding the effects caused by the pandemic.”

Fitch said it forecasts Solventum will benefit from Fitch-defined EBITDA margins in the range of 25% to 26% over the near term with opportunities to widen them.

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