Sealed Air shares hit by asbestos worries
which makes Bubble Wrap and other protective packaging for the food
industry, have plummeted this week after the ruling by a US judge
which will make it easier for claimants to seek damages against the
group's Cryovac unit for asbestos-related injuries.
Shares in the US-based packaging company Sealed Air Corporation, which makes Bubble Wrap and other protective packaging for the food industry, have plummeted this week after the ruling by a US judge which will make it easier for claimants to seek damages against the group for asbestos-related injuries.
The claims in fact refer to injuries suffered at Cryovac, the packaging unit of W.R. Grace which Sealed Air acquired in 1998. Grace subsequently filed for bankruptcy, and lawyers say that the sales was carried out to shield Cryovac's assets from suffering the same fate. As such, these assets should now be used to settle the 3,000 or so asbestos claim, they argue.
The ruling US District Court Judge Alfred Wolin on Tuesday said that asbestos claims against Grace after 1998 could be included in an upcoming trial to determine if Grace was solvent then. The trial is due to start on 30 September.
The news has come as a bad blow to Sealed Air, as Cryovac accounts for 60 per cent of its sales and its acquisition was seen as strategic for the group's long-term strategy. The company said it would appeal against the decision. It shares fell 42 per cent on Tuesday and 34 per cent on Wednesday as a result of the ruling.
In a press conference held yesterday, Sealed Air's president and CEO William Hickey said that while the company sympathised deeply with the victims of asbestos, many of whom were now shareholders in Sealed Air, the deal to buy Cryovac had included a clause indemnifying Sealed Air from any subsequent asbestos claims, a move which he added was wholly justified since neither Cryovac nor Sealed Air had ever sold any asbestos products.
If Cryovac's assets are to be used to pay the claimants, then lawyers will have to show that Grace was insolvent or became insolvent as a result of the Cryovac transaction. Hickey admitted that the judgement earlier this week had been a disappointment to the company, but stressed that it had not ruled that the Cryovac deal had been illegal, or that the assets can be used to pay the claimants.
The full text of Hickey's statement can be found on the Sealed Air website.
