Johnson & Johnson (NYSE:JNJ) stock is climbing today. The conglomerate offered to pay $8.9 billion to resolve lawsuits related to the talc in its baby powder and other products. Roughly 60,000 plaintiffs who alleged that they or their family members developed cancer due to the talc have accepted the offer, JNJ reported.
Johnson & Johnson Upped Its Offer
In January, a federal court struck down Johnson & Johnson’s effort to restrict its liability for the talc lawsuits to a subsidiary. That subsidiary, LTL Management, had filed for bankruptcy. Before the court’s ruling, JNJ had offered the plaintiffs only $2 billion.
In the wake of the recent settlement deal, LTL again filed for bankruptcy yesterday.
J&J intends to try to convince a court to approve LTL’s latest bankruptcy declaration and the settlement as soon as next month. However, some plaintiffs could try to lobby the court to derail the proposal.
The Implications for JNJ Stock
As of the end of last year, JNJ had $23.5 billion in cash on its balance sheet. So $8.9 billion is not going to cripple the company. However, the conglomerate did have $41 billion of debt at the end of Q4. Therefore, it may have to sell some additional shares of JNJ stock or unload a number of its businesses down the road.
On the other hand, the proposed deal, which was accepted by about 60,000 plaintiffs, does represent a “light at the end of the tunnel” for JNJ and its investors. The news also indicates that the conglomerate will not, in the end, be very badly hurt by the lawsuits.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.