Dow-DuPont could be on hook for Teflon liabilities, groups say

July 19, 2016

DuPont Co. and Dow Chemical Co. should tell shareholders before Wednesday’s merger vote that they may face exposure to costly potential damages from claims that a chemical used to make Teflon caused cancer and other ailments, community activists are telling the companies.

While DuPont is the named target of the 3,500 lawsuits filed by people living near a Teflon plant in Parkersburg, West Virginia, the company has claimed that  Chemours Co., a spinoff it created last year, is required to pay any damages. Chemours indicated last week that it may fight efforts to force payment, saying it “retains legal defenses” to DuPont’s claims of indemnification.

DuPont and Dow should tell shareholders before they vote on the $59 billion merger that the combined companies could end up getting stuck with the bill, Action Fund Network and Keep Your Promises DuPont wrote. The merger partners should also share updated federal guidance on how much of the Teflon chemical people can safely be exposed to and the potential liability at 19 polluted sites, the activists wrote in a letter published in DuPont regulatory filing Friday.

The undisclosed items “are substantial, material liabilities that Wilmington, Delaware-based DuPont faces as a result of its decades-long contamination caused by PFOA, which Dow shareholders stand to inherit,” the groups said in the letter, referring to perfluorooctanoic acid.

Midland, Michigan-based Dow Chemical is the parent company of Indianapolis-based Dow AgroSciences, which has about 1,500 area employees.

Dow agreed in December to merge with DuPont and form the world’s largest agriculture business, with combined ag sales of about $18 billion. In February, the companies said that Wilmington, Delaware, will be the headquarters for their combined agricultural business, but that Indianapolis will be one of its two “global business centers.”

Required disclosures

DuPont said in the filing that it has disclosed all the information necessary under federal law. The company remains “committed to fulfilling all our legal and environmental obligations as it relates to PFOA,” spokesman Dan Turner said in an email.

Representatives of Chemours and Dow didn’t respond to requests for comment.

Potential payments related to health claims from exposure to the Teflon chemical could reach $1.9 billion, according to Bloomberg Intelligence. DuPont this month was ordered by an Ohio jury to to pay more than $5.5 million to a man who developed testicular cancer after drinking water polluted with PFOA. It was the sixth case to be resolved, with 40 more scheduled for next year.

It makes sense that Chemours would try to break the indemnification clause in last year’s separation agreement because the potential liability is the biggest drag on the stock price, said Christopher Perrella, an analyst at Bloomberg Intelligence. While shares advanced earlier this year, they’re down 57 percent since debuting in June 2015.

“The legal argument is probably tenuous, but where there is a will, there is a way,” Perrella said by phone. “It may be hard for Chemours to get out from under it unless they go bankrupt.”

According to the activists’ letter, in addition to already disclosed potential cleanup costs at 174 polluted sites, which could total $900 million, there are another 19 sites. The groups also cited a lack of disclosure about a May 16 report from the Environmental Protection Agency that lowered the amount of PFOA viewed as acceptable in drinking water, saying the change could spark more lawsuits similar to those in Ohio and West Virginia.

The companies may face additional PFOA lawsuits in the Netherlands, the groups said.


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