NEW YORK, Nov. 12 (Reuters) – Johnson & Johnson (JNJ.N) on Friday announced it would split into two companies, parting ways with its consumer health division which sells bandages and baby powder from its pharmaceutical products and medical devices business.
The historic break comes as J&J faces nearly 40,000 lawsuits alleging its baby powder and other talc-based products contained asbestos and caused cancer, which the company denies. The plaintiffs include women with ovarian cancer and others battling mesothelioma.
Chief Executive Alex Gorsky told the Wall Street Journal that the talcum powder dispute did not play a role in the decision to dissolve J&J. The company aims to complete the separation in 18 to 24 months.
In October, J&J embarked on a separate business reshuffle aimed squarely at tackling its talc commitments. Here’s what J&J did:
TEXAS TWO STEPS
Using Texas divisional merger law, the company’s Johnson and Johnson Consumer Inc business split in two, offloading talc responsibilities to a newly formed subsidiary. The subsidiary, called LTL Management LLC, then moved to North Carolina.
A few days after these moves, LTL filed for Connecticut bankruptcy. In legal circles, the series of deals is known as “Two-Step Texas”.
J&J has offered to contribute $ 2 billion to the resolution of the remaining talc litigation as part of the Connecticut bankruptcy reorganization of the newly formed subsidiary.
CONTROVERSIAL LEGAL DISPLACEMENT
Earlier this week, a North Carolina bankruptcy judge overseeing the proceedings moved the case to New Jersey, where J&J is headquartered. It also suspended the talcum litigation against J&J for 60 days, extending to the healthcare conglomerate a legal shield already provided to LTL, the entity under bankruptcy protection.
Lawyers for the plaintiffs have denounced J&J’s latest move to grapple with talc-related liabilities, accusing the financially sound company of manipulating the bankruptcy system without seeking Chapter 11 protection itself.
In Washington, Congressional Democrats introduced legislation that would ban the use of division mergers to offload responsibility as J&J has done, and also limit the ability of companies that have not filed for bankruptcy to obtain claims. legal protections extended to those benefiting from Chapter 11 judicial protection.
J&J, a blue chip company with a market value of over $ 400 billion, has spent nearly $ 1 billion defending itself against the talc litigation. The settlements and verdicts cost the New Brunswick and New Jersey-based company an estimated $ 3.5 billion more, although this has prevailed in some cases.
A Reuters investigation in 2018 found that J&J had known for decades that asbestos, a known carcinogen, was lurking in its baby powder and other talc-based cosmetics. The company stopped selling baby powder in the United States and Canada in May 2020, in part because of what it called “misinformation” and “unfounded claims” about the product. talc. J&J maintains that its talcum-based consumer products are safe and confirmed by thousands of tests to be asbestos-free.
In June, the United States Supreme Court refused to hear J&J’s appeal against a Missouri court ruling that resulted in $ 2 billion in damages awarded to women alleging that the company’s talcum powder had caused their ovarian cancer.
Reporting by Mike Spector; additional reporting by Maria Chutchian; edited by Edward Tobin
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