ABB stock tumbles after US court decision
ABB shares fell by more than 11 per cent on Friday after a court rejected the engineering group’s plans to settle asbestos claims in the United States.
The surprise rejection of ABB’s $1.2 billion (SFr1.4 billion) settlement is seen as a major setback for the company.
On Thursday the Third Circuit Court of Appeals in Philadelphia threw out the plan, saying the settlement would have to be renegotiated by lower courts.
Company shares traded on the virt-x platform dropped by 11.93 per cent to SFr6.20 ($5.43) at the close of trading.
On Thursday, the group’s US-listed stock fell by 11.7 per cent to close at $5.45, but remained stable in Friday trading.
“Harsh blow”
“It is a harsh blow for ABB,” commented Claude Zehnder at Zurich Cantonal Bank.
“We waited so long and now it has not been approved,” he added, referring to the fact that most market observers had expected the decision to be in ABB’s favour.
Lehmann Brothers investment bank said in a note that the concern for equity holders was the uncertainty and the extra costs of any settlement.
The court decision is likely to rule out any swift divestment of Combustion Engineering, the bankrupt company at the centre of the asbestos claims.
Before ABB bought the company, Combustion Engineering used to make industrial boilers insulated with asbestos material.
But ABB said on Friday it still expected to resolve its asbestos liabilities quickly.
“It is too early to be more precise,” commented group chairman Jürgen Dormann, in a conference call, adding that he expected any additional costs to be “insignificant”.
If accepted, the deal would settle the vast majority of claims made by more than 100,000 people suffering from the effects of exposure to asbestos.
Legal wrangling
But a number of claimant groups have lodged appeals against the company’s plans, and the settlement remains stuck in the courtrooms.
Investors have been waiting for a definitive US court ruling in the hope that it will end years of legal wrangling and allow ABB to complete a drastic overhaul, including the sale of businesses embroiled in the asbestos case.
ABB has been restructuring since 2002, when it almost collapsed under a multibillion-dollar debt mountain.
Outgoing CEO Jürgen Dormann took an axe to the company, slashing around 40,000 jobs and selling off “non-core” assets around the world.
But Thursday’s ruling means it is now likely to be up to Dormann’s successor, Fred Kindle, to steer the company through the next stage of settlement negotiations.
swissinfo with agencies
A US appeals court has sent ABB’s $1.2 billion (SFr1.4 billion) asbestos settlement back to lower courts to be renegotiated.
But ABB said it would move quickly to resolve the problems raised by the court.
The Swiss-based engineering group said it was confident the settlement would be concluded without significant additional cost.
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