Maplewood-based 3M Co. on Tuesday named aerospace veteran William Brown as its new chief executive officer, a move aimed at providing fresh direction for a company mired in mounting legal liabilities and a much-diminished stock price.
The former CEO of defense contractor L3Harris Technologies Inc. will take the top post at 3M on May 1, the company said. The move caps a turbulent run of nearly six years for current leader Mike Roman, who failed to convince investors that 3M can overcome low profit margins, sluggish revenue growth and ongoing earplug and chemical lawsuits. Roman will stay on as executive chair.
It’s unusual for 3M to go outside its own ranks to lead the 122-year-old industrial giant. The announcement was immediately applauded by investors: News of the move sent shares up as much as 7.2% after the succession was announced, the most since June 2023.
Shares are still down around 10% for the year, but analysts welcomed Brown’s operational and deal-making track record. 3M closed up nearly 5% on Tuesday.
“This seems like a good hire for 3M and an appropriate time to bring in an outsider, something of a rarity at 3M,” Deane Dray, an analyst at RBC with a neutral rating on the stock, wrote in a research note.
3M has lost roughly half of its market value since Roman took over in mid-2018. Its mushrooming legal setbacks, sputtering post-pandemic sales and multiple cost-cutting measures have soured investors.
As one of the last diversified conglomerates manufacturing products ranging from Post-it Notes to electronic display screens, it has increasingly become an anomaly in a corporate america that rewards narrow product lines, high growth and higher profit margins.
Now, the new CEO must confront 3M’s many problems, including fallout from class action lawsuits that could cost the company untold billions. A longtime leader in the industrials and defense industries, Brown, 61, has decades of experience overseeing sprawling companies with exposure to legal and regulatory challenges.
He also brings ample experience with mergers and spin-offs.
Brown oversaw the 2019 merger of Harris Corp. and L3 Technologies Inc., creating a defense giant to compete with the likes of RTX Corp. and Northrop Grumman Corp. He served as CEO and then chairman before exiting in 2022.
Under his tenure, the aerospace and defense company’s shares skyrocketed to all-time highs as it streamlined and spun off non-core businesses. Prior to Harris, he spent 14 years at United Technologies Corp. where he successfully integrated multiple acquisitions.
Brown recently re-emerged as a special adviser for a review of L3Harris’ businesses as part of a a deal with activist investor D.E. Shaw. That activist experience could come in handy as 3M plots its way forward.
His arrival comes just months after Roman, 64, initiated the largest restructuring in 3M’s history, cutting thousands of jobs and overhauling its supply chain.
3M also has sought to resolve claims over its production of so-called forever chemicals, including a deal to pay as much as $12.5 billion to water utilities over allegations it tainted the water supply across many US cities.
Roman also set up 3M’s biggest portfolio shakeup in years by agreeing to spin off its health care division, which accounts for roughly 25% of sales. That April 1 transaction will provide 3M with nearly $8 billion in much-needed cash and a stake of about 20% in the new company that it plans to sell over time.
But the changes haven’t been able to convince investors. After the company forecast financial targets short of Wall Street expectations in January, 3M’s stock plummeted the most in five years.
Brown’s track record for deals signals that more portfolio changes may be in store for 3M and its dizzying array of businesses spans roofing granules, abrasives, tapes, office supplies and more.
The management change “is a bid to bring fresh perspective to a portfolio that had been challenged” under Roman, Bloomberg Intelligence analyst Karen Ubelhart said in a research note.
Among the key decisions Brown will likely confront at 3M is the fate of the company’s cherished dividend. 3M has earned a reputation as a “dividend aristocrat” by returning cash to shareholders for more than a century without interruption, and lifting the payout annually for the last several decades.
The loss of steady cash flows from 3M’s health care business and its growing legal bills have fueled investor expectations that the payout is bound for a reset.
