Lung Cancer Fact

James Hardie to Sign Asbestos Compensation Deal

Source: Bloomberg

Dec. 1 (Bloomberg) -- James Hardie Industries NV, Australia's fourth-largest building materials maker, will today sign a A$1.6 billion ($1.2 billion, US) deal to compensate people sickened by asbestos contained in its products.

The deal, approved by the Sydney-based company's board today, comprises an initial A$154 million payment to a compensation fund and annual contributions capped at 35 percent of cash flow for at least 40 years, James Hardie said in a statement.

Final implementation of the agreement still depends on James Hardie getting tax breaks on the compensation payments and winning approval from lenders and shareholders. The stock rose as the deal signaled an end to a bitter two-year fight with victims and unions after revelations the company had underfunded a compensation trust.

"The strident rhetoric over the last couple of weeks had created a climate of uncertainty," said Warwick Cumming, head of equities research at Tyndall Investment Management Ltd. in Sydney. With today's deal, "they're closer to a resolution and knowing what the final outcome looks like."

James Hardie shares rose 27 cents, or 3.2 percent, to A$8.68 at 12:34 p.m. in Sydney today. The stock has risen 31 percent this year. The stock has surged 73 percent since August 2004, when the company said the fallout from a New South Wales government inquiry into its asbestos compensation had led to boycotts of its building products.

James Hardie is the biggest seller of home sidings in the U.S., where it gets 80 percent of its profit.

Outstanding Issues

New South Wales Premier Morris Iemma forced a resolution this week when on Nov. 28 he gave James Hardie a 24-hour deadline to strike a deal or face legislation forcing the company to meet its obligations.

Still, James Hardie Chairwoman Meredith Hellicar said there were some outstanding issues to be resolved, such as the tax treatment of payments to the compensation fund. ``Today is not the end of the process,'' she said.

The value of outstanding asbestos claims was estimated to be A$1.57 billion as of June 30, according to KPMG Actuaries Ltd.

James Hardie incorporated in the Netherlands in 2001, after transferring its asbestos liabilities to the Medical Research and Compensation Fund. It retained its corporate headquarters in Sydney.

The New South Wales inquiry found the fund, set up in 2001 with assets of A$293 million, would run out of money within three years.

The probe led to the resignation of Peter Macdonald as chief executive in October 2004, after the inquiry found he had misled investors. Chief Financial Officer Peter Shafron also quit.

James Hardie started using asbestos in Australia in the 1920s. It began to phase out blue asbestos in 1968, and all products were asbestos-free by 1986. The fibrous mineral has been linked to lung cancer and mesothelioma, a form of cancer affecting the chest or abdomen.

Bloomberg article

To contact the reporter on this story: Miriam Steffens in Sydney at msteffens1@bloomberg.net