J&J shares surge 4% a day after $8.9bn offer to settle multiple baby talc legal cases

Johnson & Johnson campus in Irvine, California: Monies in the settlement of the multiple baby talc cases would be paid out over 25 years.

Johnson & Johnson's shares jumped 4% a day after the company offered $8.9bn (€8.1bn) to settle multiple baby talc-related lawsuits in the US, easing an overhang on its plans to list its consumer health unit Kenvue.

Some analysts were positive about the new settlement that is far bigger than the original offer of $2bn, as they believe it could bring an end to the lawsuit. JP Morgan analyst Chris Schott said the settlement amount was in line with the broker's estimate of $8bn to $10bn. 

The company had said it secured the support of about 60,000 claimants for the offer who had alleged that talc in its iconic Baby Powder and other products caused cancer. 

If enough victims agree to join the accord, J&J will be freed from defending against cancer claims tied to baby powder and others products tainted by asbestos. 

Juries ruled against the company in nearly a dozen such suits over the years — including one appealed all the way to the US Supreme Court — before J&J was forced to pay $2.5bn to a group of 20 women whose case went to trial in 2018.

“Resolving this matter through the proposed reorganisation plan is both more equitable and more efficient, allows claimants to be compensated in a timely manner,” Erik Haas, J&J’s worldwide head of litigation, said in a release. Monies in the settlement will be paid out over 25 years.

J&J lawyers reiterated that talc claims lacked scientific merit and accused plaintiffs' lawyers of continuing to advertise for clients in the hopes of extracting large financial sums.

The settlement follows a January appeals court ruling invalidating J&J's controversial "Texas two-step" manoeuvre which it sought to offload the talc liability onto a subsidiary LTL Management that immediately filed for bankruptcy.

Under the agreement, while J&J and LTL would have retained the talc-related liabilities for products sold in the US and Canada, Kenvue would be responsible for liabilities outside those regions. 

"We believe today's announcement should help the IPO (initial shares sale) of 20% of the consumer unit," Credit Suisse analyst Trung Huynh said. 

The support of 60,000 plaintiffs represents a supermajority of 75% required for a judge to approve J&J's restructuring plans, TD Cowen analyst Joshua Jennings said. 

Reuters and Bloomberg