SOLV Solventum Corporation

Trian Fund Management, L.P. (“Trian”), which beneficially owns ~5% of Solventum Corporation (NYSE: SOLV) (“Solventum” or the “Company”) and is the Company’s largest active shareholder, today released an open letter and slide deck outlining its views on performance and opportunities for value creation ahead of Solventum’s expected Long Range Plan (“LRP”) announcement in February.

The letter notes that Trian believes Solventum, formerly 3M’s Health Care division, owns high-quality businesses which delivered consistent performance for many years inside of 3M. Trian believes Solventum’s separation from 3M should enable it to deliver even better performance as a focused, independent company.

Trian believes Solventum’s separation is not living up to its potential, noting that the Company is performing at a much lower level today than it did inside of 3M. Prior to the spin, 3M research analysts, on average, estimated Solventum would be valued at $33 billion when it spun out of 3M, implying a share price more than double where Solventum’s shares are currently trading. Today, Solventum trades at a lower valuation multiple than each of its subsidiary peer groups, and it even trades at a significant discount to its former parent, 3M, despite Solventum having been 3M’s best performing business.

Given performance declines, Trian initiated dialogues with management and the board, noting that Solventum would benefit from increased engagement with Trian and other shareholders to assist in formulating a more ambitious plan to drive performance and value creation over the near, medium and long-term. To date, there has not been sufficient progress. Accordingly, Trian is releasing its letter to provide important context on the Company’s historical performance and spin-related opportunities to facilitate better discussion among shareholders, management and the board regarding performance expectations ahead of the Company’s LRP announcement. Trian appreciates that Solventum is a relatively new public company, but that makes it even more important for its leadership to act with urgency to reverse the declines and communicate a plan that appropriately reflects the potential of its businesses. Highlights from Trian’s letter include:

Solventum’s separation from 3M should enable significant performance improvements.

• Solventum was 3M’s best performing business – it was consistently 3M’s fastest growth and highest margin division.
• As an independent company, Trian believes Solventum should be able to perform even better than it did inside of 3M, as the division lacked focus inside of its former conglomerate parent, and it had to manage through large corporate cost allocations.
• Similar to other spins, Solventum should be able to increase investments in growth and fund those investments with savings generated by right sizing its overhead structure and increasing focus and accountability throughout the organization.

Solventum has seen a major decline in performance since spinning out of 3M.

• In a short period of time, Solventum went from consistently growing organically at a low-to-mid single digit rate at a mid-to-high 20% operating margin – to a business that is barely growing today at a low-20% operating margin, despite its core end markets continuing to perform well.
• Today, Solventum’s growth and margins are at historic lows, and the Company has not created an expectation for meaningful improvements going forward.

The expected decline in Solventum’s profit margins is nearly unprecedented.

• Trian analyzed comparable mid-to-large cap spins over the past decade. The average mid-to-large cap spin delivered approximately +125bps and +160bps of margin expansion, respectively, in the first and third full year following separation compared to the standalone pro forma adjusted margins disclosed pre-spin. Spins at the 75th percentile delivered +240bps and +300bps of margin expansion over those same periods.
• Consensus estimates (albeit not Company guidance) expect Solventum’s margins to decline by (425bps) in its first full standalone year, which would make it a bottom decile performer.

Some have suggested Solventum’s step-down in performance will result in an extremely low bar and easily allow the Company to “beat” on earnings expectations over time.

• Solventum’s performance decline has gone beyond the scope of 3M spin-related headwinds and appropriate layers of conservatism. Great companies drive businesses forward and set conservative guidance in that context.
• The purpose of the spin was to further improve performance – not take a major and prolonged step backwards.

Solventum must outline a LRP that restores performance to historical levels and beyond.

• Over any reasonable multi-year time period (3, 5, 10, 20 years), the business grew 3% to 4% organically at a 26%-27% EBIT margin inside of 3M.
• Trian believes historical performance levels and spin-related opportunities should help frame the goal posts for Solventum’s operating targets and broader strategy.
• By restoring performance to historical levels, Trian believes Solventum’s shares could be worth $140 by year-end 2027 (see page 14 of Trian’s slide deck for details).

Simplifying Solventum’s portfolio can further enhance the value creation opportunity.

• Three of the Company’s four reporting segments are strategically and operationally distinct from its core MedSurg segment. Combined, these businesses represent approximately 45% of the Company’s sales: Dental Solutions, Health Info Systems, and Purification & Filtration.
• Reducing portfolio complexity can improve focus and execution at the remaining businesses.
• While non-core, Trian believes each of these businesses is highly valuable and likely worth a substantially higher valuation multiple than where Solventum trades today.
• Divestitures could accelerate Solventum’s deleveraging and enable value-enhancing capital allocation decisions including dividends, share repurchases and bolt-on M&A.

Trian’s full letter and accompanying slides are available to view online at: https://trianpartners.com/wp-content/uploads/2025/01/2025-01-08-SOLV-Shareholder-Letter-Release.pdf

About Trian Fund Management, L.P. Founded in 2005, Trian Fund Management, L.P. (“Trian”) is a multi-billion dollar investment management firm. Trian is a highly engaged shareowner that combines concentrated public equity ownership with operational expertise. Leveraging the 50+ years’ operating experience of our Founding Partners, Nelson Peltz and Peter May, Trian seeks to invest in high quality but undervalued and underperforming public companies and to work collaboratively with management teams and boards to help companies execute operational and strategic initiatives designed to drive long-term sustainable earnings growth for the benefit of all shareholders.

Media Contacts: Anne A. Tarbell(212) 451-3030atarbell@trianpartners.com

Paul Caminiti / Pamela Greene / Jacqueline ZuhseReevemark(212) 433-4600Trian@reevemark.com

Investor Contact: Matt Underhill(212) 451-3171munderhill@trianpartners.com

Disclaimer

Except as otherwise set forth in this press release, the views expressed in this press release reflect the opinions of Trian Fund Management, L.P. and its affiliates (“Trian”), and are based on publicly available information with respect to Solventum Corporation (the “Company”). Trian recognizes that there may be confidential information in the possession of the Company that could lead it or others to disagree with Trian’s conclusions. Trian reserves the right to change any of its opinions expressed herein at any time as it deems appropriate and disclaims any obligation to notify the market or any other party of any such change, except as required by law. Trian disclaims any obligation to update the information or opinions contained in this press release. For the avoidance of doubt, this press release is not affiliated with or endorsed by the Company.

This press release is provided merely as information and is not intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy any security nor as a recommendation to purchase or sell any security. Funds managed by Trian currently beneficially own shares of the Company. These funds are in the business of trading – buying and selling– securities and intend to continue trading in the securities of the Company. You should assume such funds may from time to time sell all or a portion of their holdings of the Company in open market transactions or otherwise (including via short sales), buy additional shares (in open market or privately negotiated transactions or otherwise), or trade in options, puts, calls, swaps or other derivative instruments relating to such shares.

Some of the materials in this press release contain forward-looking statements. All statements contained herein that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words “anticipate,” “believe,” “expect,” “potential,” “could,” “opportunity,” “estimate,” “plan,” and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained herein that are not historical facts are based on current expectations, speak only as of the date of these materials and involve risks, uncertainties and other factors that may cause actual results, performances or achievements to be materially different from any future results, performances or achievements expressed or implied by such projected results and statements. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Trian.

Certain financial projections and statements made herein have been derived or obtained from filings made with the Securities and Exchange Commission (“SEC”) or other regulatory authorities and from other third-party reports. Trian shall not be responsible or have any liability for any misinformation contained in any third-party, SEC or other regulatory filing or third-party report.

There is no assurance or guarantee with respect to the prices at which any securities of the Company will trade, and such securities may not trade at prices that may be implied herein. The estimates, projections and potential impact of the opportunities identified by Trian herein are based on assumptions that Trian believes to be reasonable as of the date of this press release, but there can be no assurance or guarantee (i) that any of the proposed actions set forth in this press release will be completed, (ii) that the actual results or performance of the Company will not differ, and such differences may be material, or (iii) that any of the assumptions provided in this press release are accurate.  This press release does not recommend the purchase or sale of any security.