By Peg Brickley
France-based Imerys SA is offering to sell a bankrupt North American unit that was historically a major supplier of talc to Johnson & Johnson in an effort to escape litigation linking its products to ovarian cancer and mesothelioma.
Only a few product-liability lawsuits had been filed against the U.S. business in 2011 when it was acquired by Imerys, but by the time the unit filed for bankruptcy last year, Imerys Talc America Inc. was swamped by roughly 13,800 claims tied to ovarian cancer and 850 related to mesothelioma, a form of lung cancer.
Imerys Talc America had supplied talc to Johnson & Johnson, the prime target of this litigation. Johnson & Johnson has said its products are safe and not contaminated, and has offered to defend Imerys Talc America in the lawsuits where both companies are named as defendants.
Court documents don't put a dollar figure on Imerys's potential liabilities or on the combined value of the assets to be assigned to the bankruptcy trust for Imerys Talc America.
If the restructuring proposal is approved by the court overseeing the unit's bankruptcy, both Imerys Talc America and the French parent company will be shielded from liability over allegedly contaminated products, with product liability claims channeled to the bankruptcy trust for resolution.
Johnson & Johnson has won some state court trials and lost some, and generally has prevailed on appeal.
Discussions continue between Imerys and Johnson & Johnson as each is claiming rights to be reimbursed by the other in the event one of the companies has to pay big damages, according to court papers.
Imerys is following a U.S. bankruptcy playbook that has helped companies including Pfizer Inc. shake off legal trouble at corporate subsidiaries. In 2013, Pfizer used bankruptcy to resolve lawsuits over a small manufacturer it owned, Quigley, which made asbestos-tainted products decades ago.
The strategy is to place the units closest to the litigation into bankruptcy protection and negotiate with creditors over an appropriate contribution from the parent to a bankruptcy trust that will pay out settlements. In exchange for the contribution, the parent company gets legal immunity.
Imerys is contributing at least $177 million, including funds to make sure the bankruptcy trust gets what it is promised no matter the sale price for the talc mines, which are scheduled to be put up for auction in late September along with land, buildings and equipment. A good sale price would add to the size of the trust.
The business is to be kept in operation as it is sold and regular trade debts will be paid in full as part of the chapter 11 plan, court papers said. Imerys is also funding the unit's bankruptcy expenses, with cash of up to $15 million.
On the insurance front, Imerys said $670 million in coverage is available for ovarian-cancer claims, while there is $160 million in coverage for mesothelioma claims, according to court papers.
People with cancer claims have to vote in favor of the chapter 11 plan terms and a bankruptcy judge has to approve them as legally sound before they can be put into effect.
Write to Peg Brickley at email@example.com