Shares Surge in Firms Linked to Asbestos
NEW YORK (Reuters) - Shares of companies linked to the manufacture of asbestos rose Thursday after one firm said it would take a $904 million charge to settle asbestos-related claims and another sued a number of prominent personal injury lawyers for racketeering, alleging unfounded asbestos claims.
Shares of floor and ceiling products maker Armstrong Holdings Inc. (NYSE:ACK - news), whose major subsidiary filed for bankruptcy protection on Dec. 6 because of rising asbestos claims, surged 30 percent.
Armstrong's shares gained $1-1/16 to $4-5/8 on the New York Stock Exchange (news - web sites), off a 52-week low of 3/4 but far from a year-high of $36-13/16. Among other asbestos-related shares that rose, W.R. Grace & Co. (NYSE:GRA - news) gained 1/4 to $4 and Federal-Mogul Corp. (NYSE:FMO - news) added 3/16 to $3-13/16.
Building product manufacturer USG Corp. (NYSE:USG - news) said on Thursday most of its pre-tax charge would be taken to settle asbestos-related claims, while privately held G-Holdings alleged that lawyers schemed to flood U.S. courts with hundreds of thousands of asbestos cases regardless of their legitimacy.
Analysts cited the lawsuit, falling interest rates and the USG announcement, which for the first time estimated what the asbestos claims would cost it, as reasons for shares to surge.
``I thought USG was up, number one, because there was finally a number, and because that number was in the lower end of what people had expected,'' said John Kasprza, an analyst with BB&T Capital Markets.
``I think that's also part of why Armstrong is up. Having any number is good, and having a low number is even better. With the lawsuit, it's probably the first time in a long time there have been multiple good news in asbestos.''
Armstrong said in November its asbestos-related liabilities could reach up to $1.4 billion by 2006, though it stated those liabilities in a Securities and Exchange Commission (news - web sites) filing as $822.5 million.
Some Stocks Pare Gains
Besides the lawsuit and USG announcement, ``I suspect a third reason is that all of Armstrong Holdings are not in Chapter 11, and I think people are beginning to realize that,'' said Lawrence Horan, a director of research at investment company Parker/Hunter in Pittsburg.
Armstrong, whose shares have more than quadrupled since it filed for bankruptcy on Dec. 6 to protect itself from rising asbestos claims, did not immediately comment on the surge in its stock price Thursday.
Bill Allyn, Jefferies & Co. director of principal trading, Short Hills, N.J., said the stocks could have benefited from lower interest rates. ``Anything in the building trades, mortgages, construction, are going to benefit,'' he said.
USG fell 1/16 to $21-11/16 after intraday gains, and Owens Corning Inc. (NYSE:OWC - news), a building materials maker that filed for reorganization in October because of asbestos claims, rose 15 percent in intraday trading before shedding gains, closing down 2/16 to $1-15/16.
USG's announcement that it would take the charge against its 2000 earnings for restructuring costs and costs associated with pending asbestos liability cases and lawsuits anticipated through 2003 helped push its share price higher, said Trip Rodgers, an analyst at UBS Warburg.
``I think people are happy that they put a number on their liability claims, even though there is still a large amount of uncertainty about the final size of the liability,'' he said.
The purchase of an almost 15 percent stake in USG by Berkshire Hathaway Inc., the investment vehicle of billionaire investor Warren Buffett, has likely helped the stock price too, Rodgers said. The purchase was reported in a Securities and Exchange Commission filing in November.
Christopher Winham, an analyst at Goldman Sachs, said USG would likely have to come back with more asbestos-related charges in the future, since the company said the charges would only cover through 2003.
Federal-Mogul, which faces $900 million in asbestos-related claims, has seen its shares more than double in the last two months. The company announced a new chief executive on Thursday.
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