Italy’s dairy group Parmalat SpA said that it will issue new stock valued at more than $36 million to settle a class-action case against it. Parmalat will also pay up to 1 million euros ($1.55 million) of the cost of notifying the class members of the settlement, the statement said.
The settlement removes the threat of a suit that had been weighing on the Italian company’s stock. Parmalat shares jumped on the news and by late morning they were trading up 2.6 percent at 2.25 euros ($3.50), outperforming an overall positive market. The dairy firm, which collapsed under 14 billion euros of debt and re-listed in 2005, said in the statement that the settlement is in the best interest of its shareholders to avoid the distraction and expense of further litigation and diminishes uncertainty in the value of its stock.
Parmalat faces another key legal test Monday. It brings a case against Citigroup Inc. alleging the U.S. bank contributed to its spectacular bankruptcy in 2003.
The amount to be paid according to the settlement is significantly lower than expected. We were factoring in the issue of approximately 100 million shares to settle the class action, Santander analysts said.