Abbott Laboratories announced plans to spin off its nutrition business into a standalone public company, citing costly litigation over baby formula. The division, which generated $8.5bn in annual sales, includes the Ensure, Glucerna, and Similac brands. The move follows a wave of class action lawsuits linking formula to necrotising enterocolitis in infants.
Abbott agreed to pay $670m to settle claims for about 2,000 children who developed bowel disease after using Similac. The company also paid nearly $385m to the US justice department to resolve a False Claims Act case related to contamination at a Michigan plant. Despite the spin-off, Abbott reported a 5.1% increase in nutrition business sales during the third quarter.
However, the company's shares fell 4.3% on Wednesday, bringing year-to-date losses to almost 22% and valuing the group at $169bn. Abbott shareholders will receive shares in the new entity through a tax-free spin-off expected to complete by the end of next year. Daniel Salvadori, Abbott Nutrition executive, will serve as chief executive of the new company.
Source: Financial Times Companies · Summarized by HeadlinesBriefing