Johnson & Johnson (NYSE:JNJ)
The news leaked on Tuesday that Johnson & Johnson (NYSE:JNJ) is preparing to settle a talc lawsuit against it for $8.9 billion has been met with a generally positive reception from the companies that do business on Wall Street.
LTL Management, a subsidiary of Johnson & Johnson (JNJ) that was established for the sole purpose of filing for bankruptcy to manage all of the claims, would be required to submit a second bankruptcy petition as part of the settlement agreement. Its first petition was denied by a court.
According to Guggenheim, which has a neutral rating on JNJ stock, J&J’s new strategy may remove an overhang that has been weighing on the company’s stock for some time. This overhang has been a negative factor. The company also said that if the talc dispute could be resolved, investors could concentrate on future data readouts and separation of the consumer health segment.
Cantor Fitzgerald, an investment firm, also sees the announcement as a good development and says that the strategy has the potential to end the talc dispute once and for all and ensure that the consumer health spinoff proceeds in the manner that was originally envisioned. It assigns an overweight rating on JNJ stock. It has a price target of $215 (representing an upside of around 36% based on Tuesday’s closing price).
Wells Fargo has an overweight rating and a price target of $195 on JNJ stock (representing an upside of around 23%). According to the company’s legal expert, the 8.9 billion dollar settlement has an equal probability of succeeding and failing.
In addition, the expert said that it is not apparent how J&J would be able to persuade a judge to approve this bankruptcy application after its first effort to file for bankruptcy was denied by an appeals court.
An argument made by Johnson & Johnson that declaring bankruptcy was required owing to the “financial distress” it was facing as a result of the claims was shot down by this court.
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