Solutia bankruptcy threat,Pfizer clinic sealed PCB deal

posted on:
August 21, 2003

author:
Gary Tayler

category:
Environmental

HOUSTON (CNI) – Monsanto’s fear of a Solutia bankruptcy and Pfizer’s offer to help establish a medical clinic rank as the key factors that prompted an historic settlement of pollution claims in Alabama, an attorney for residents told CNI Thursday. “Fear of a Solutia bankruptcy was a factor,” said Jere Beasley, the Montgomery, Alabama attorney who helped engineer a settlement valued at more than $700 million (Euro636m) in the complex case that created an unusual alliance of pharmaceutical and chemical giants as defendants. He said he believes the Solutia threat pushed Monsanto into serious negotiations. Beasley said attorneys will receive $240 million in legal fees from the settlement’s $600 million cash payout, leaving their clients to split the remaining $360 million. Beyond that cash payout, however, the settlement includes what he called a “revolutionary” agreement to establish and fun operations of a medical clinic for low income residents of Anniston, Alabama – the site of a former Monsanto plant accused in the litigation of creating a legacy of contamination by polychlorinated biphenyls (PCBs). Beasley said the clinic will include the distribution of prescription cards for use by those residents and he credited the involvement of drug giant Pfizer for finally placing that last piece of the settlement puzzle. Pfizer got involved in the case following its acquisition of pharmaceutical rival Pharmacia, which has become involved through its acquisition of Monsanto, the company that spun off Solutia in 1997. Monsanto itself was spun off from Pharmacia as a pure agribusiness company after Pharmacia had integrated Monsanto’s Searle pharmaceutical business into its own drug operations. Beasley said he expects the courts to give final approval of the settlement next week and he said he expects the companies to begin fulfilling their promises as soon as possible. He vowed that the residents’ legal team will be watching closely to make sure it all comes to pass. Besides the $600m cash payout to Anniston residents and the lawyers, the deal includes an estimated $42.5m for start-up and 20-year operation of the clinic plus another $2.5m/year for Pfizer’s prescription drug program. He said the prescription program covers all medications for any illnesses – not just those believed linked to the contamination. Beasley said: “They came up with that. We felt Pfizer wanted to make sure that its reputation was not tarnished.” He said Pfizer also has agreed to fund marketing programs designed to encourage residents to sign up for the clinic. In addition to the clinic and the cash payout, Beasley said his calculation of the settlement value includes and estimated cost of $50m – $60m for remediation of contaminated land. Beasley called it a satisfactory settlement and it appeared by later afternoon that investor shared that sentiment for the companies. The share price for Solutia had risen nearly four-fold to $3.59 from its opening Thursday of just 90 cents. Those prices compare with a 52-week low of 82 cents and a high of $7.33. At the same time Monsanto’s share price had jumped 9% to $24.77 for a new 52-week high compared with a low of $13.55. Investors appear to be showing their relief over prospects of litigation that could have cost the companies billions of dollars. A Solutia bankruptcy would have saddled former parent Monsanto with massive pension costs and other liabilities. In contrast, however, investors were punishing Pfizer with a 4% decline to $29.57 – just above the 52-week low of $27 and below the high of $36.92. But other issues – such as the approval of a new rival for Pfizer’s blockbuster erectile dysfunction drug Viagra – appeared to be influencing its share price. Beasley described the settlement as “a positive end to decades of contamination.” He said the $700m deal ranks as the nation’s “largest settlement of personal injury and property damage claims arising from environmental contamination.”

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