The cosmetics company's U.S. subsidiary is working with Weil Gotshal and Ducera to address talc-related lawsuits
By Alexander Gladstone, Andrew Scurria and Jodi Xu Klein
L'Oréal has engaged restructuring advisers to explore options for mounting U.S. legal liabilities stemming from its use of talc and other chemical ingredients in some of its cosmetic products, according to people familiar with the matter.
L'Oréal's U.S. subsidiary is working with restructuring counsel Weil Gotshal & Manges and investment bank Ducera Partners to address mass lawsuits from individuals alleging that the talc products have caused illness, the people said. L'Oréal is also among a group of beauty-products companies facing allegations that hair-relaxing products caused users to develop cancer.
The company is considering moving tort liabilities into a separate corporate entity for the purpose of unloading them through a sale to an outside investor, the people said. The strategy would allow L'Oréal to separate its tort exposure from its operating businesses and transfer responsibility for the claims to a new owner, the people said. For an investor to take on the liabilities, the attraction would be receiving a price that reflects at least the expected value of the claims, they said.
Representatives for L'Oréal, Weil and Ducera didn't respond to requests for comment.
Mass talc litigation in recent years has pushed companies to explore restructuring options to resolve claims. Consumer-goods manufacturers, including Avon Products and Johnson & Johnson, have turned to bankruptcy court in recent years to deal with an avalanche of lawsuits alleging that cosmetic talc caused cancer. Talc suppliers such as Whittaker Clark & Daniels, Imerys Talc America and Barrett Minerals have also used chapter 11 to stem mass litigation.
Honeywell last year transferred its legacy Bendix business unit and certain other asbestos liabilities to Delticus, a financial institution that specializes in acquiring legacy corporate liabilities. Honeywell contributed about $1.68 billion in cash and insurance assets, while Delticus assumed responsibility for all current and future claims.
L'Oréal's advisers are exploring a sale transaction akin to Honeywell's as an option that could address the tort claims outside of chapter 11, the people said. Any such deal would depend on the company's willingness to pay another party to take on the risk of covering current and future tort claims of an uncertain value.