Parmalat reaches settlement in US class-action case
MILAN, Italy—Italy's dairy group Parmalat SpA said Friday it will issue new stock valued at more than $36 million to settle a class-action case against it in the U.S. Southern District Court of New York.
Under the agreement, Parmalat will issue to class members 10.5 million existing shares "in full satisfaction of any and all claim asserted against it in the class action, worldwide," the company said in a statement. Those shares would be valued at $36.8 million at the current market price.
Parmalat will also pay up to 1 million euros ($1.55 million) of the cost of notifying the class members of the settlement, the statement said.
The lawsuit was brought on behalf of former Parmalat shareholders and other investors, who claimed they were damaged by Parmalat's 2003 collapse.
The settlement removes the threat of a suit that had been weighing on the Italian company's stock. Parmalat shares jumped on the news and by late morning they were trading up 2.6 percent at 2.25 euros ($3.50), outperforming an overall positive market.
The dairy firm, which collapsed under 14 billion euros of debt and relisted in 2005, said in the statement that the settlement "is in the best interest of its shareholders to avoid the distraction and expense of further litigation, and diminishes uncertainty in the value of its stock."
Parmalat faces another key legal test Monday, when it brings a case against Citigroup Inc. alleging the U.S. bank contributed to its spectacular bankruptcy in 2003.
"The amount to be paid according to the settlement is significantly lower than expected. We were factoring in the issue of approximately 100 million shares to settle the class action," Santander analysts said.
"The news is surely positive, as it somewhat reduces, according to our calculations, the number of potential new shares to be issued and the relative dilution on our valuation," they added.
Parmalat said the shares to be issued for the settlement are part of a package already set aside by the company to satisfy late claims. The transaction will result in a 0.5 percent dilution of Parmalat equity, it said.
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