Johnson & Johnson (NYSE:JNJ) has been on the ropes over cancer issues related to its use of talc contaminated with asbestos in baby powder for some time now. It’s already filed for bankruptcy once, and now it refiled for a second bankruptcy to try and protect itself from the numerous lawsuits in question while offering to pay $8.9 billion over 25 years to resolve all current and future talc claims.
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Originally, Johnson & Johnson turned to a tactic known as the “Texas two-step,” in which it established a subsidiary corporation known as LTL Management to absorb its talc-related lawsuits. Then, LTL filed for bankruptcy in a bid to fend off said lawsuits. However, the Third Circuit Court of Appeals later noted that such a strategy would not wash, as Johnson & Johnson was certainly in no financial distress. Since LTL was backed by Johnson & Johnson, that pretty much meant that LTL was similarly under no such distress itself.
Without that protection in place, Johnson & Johnson tried to get a delay together to let it appeal to the Supreme Court itself. The Third Circuit court, meanwhile, denied the delay request and allowed the bankruptcy courts to step in. LTL, for its part, noted that the bankruptcy filing would have allowed for a way to efficiently settle outstanding claims without the “lottery-like results” that have been seen in other trials.
Legal issues aside, Johnson & Johnson enjoys a certain level of analyst support. With three Buy recommendations and eight Holds, JNJ stock is considered a Moderate Buy. Further, with an average price target of $177.70, it offers 12.12% upside potential.
