3M Establishing Employee Stock Ownership Plan To Fund Retirements
May. 11, 1989
MAPLEWOOD, Minn. (AP) _ Minnesota Mining & Manufacturing Co. said it plans to create an Employee Stock Ownership Plan to help pay for employee retirement accounts, not fend off unwanted takeovers.
The company said Wednesday it plans to establish the ESOP and buy back up to 10 million shares in the next year.
Such plans have been used to thwart takeover attempts by putting more stock in friendly hands, but the 3M plan will put less than 4 percent of the company's outstanding common stock into the ESOP, said Jon Greer, 3M's program manager for investor relations.
''It is not being adopted as a takeover defense,'' Greer said. ''It's being done because it's a more cost-effective way to finance contributions to retirement accounts.''
3M will borrow $550 million to fund the ESOP with 7.5 million new shares of common stock. The shares will be allocated to employees over a 15-year period.
Even though 3M for years has been giving stock to its employees as part of retirement plans, it had never officially established an ESOP, Greer said. Under the ESOP, 3M will be able to deduct for tax purposes both the principal and interest on the borrowings, Greer said.
In addition, certain tax benefits to the lenders will allow 3M to borrow the money at lower rates. Greer declined to say how much money 3M will save under the strategy.
In a related action, 3M's board authorized the company to repurchase up to 10 million shares between May 31, 1989, and June 1, 1990. The purchases, expected to be made on the open market, will be used to replace the previously authorized shares sold to the ESOP, for existing employee stock plans, and for other corporate needs, 3M said.