Retailer Johnson & Johnson is reportedly considering parting ways with its Baby Powder unit due to an ongoing litigation, with the intention of seeking bankruptcy protection for the new business.
The plan would allow the company to potentially pay lower settlements through the smaller company, Reuters reported on Sunday, citing seven people familiar with the talks.
These sources told the publication that the company could use a Texas merger law that allows companies to split into at least two entities, known as two-stage bankruptcy.
Johnson & Johnson has yet to decide whether it will pursue its bankruptcy plan, Reuters added.
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A spokesperson for Johnson & Johnson did not immediately return FOX Business’s request for comment.
The controversy arose several years ago after Reuters and The New York Times reported that the company knew and covered up the presence of asbestos in samples of its talc-based powders. Asbestos is a carcinogen that can contaminate talc during the extraction process if proper safety measures are not taken.
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A voluntary recall was issued in 2019.
The company is currently facing thousands of lawsuits and allegations that the contaminated product has caused cancer.
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The Supreme Court declined to consider a case brought earlier this year by a group of women who claimed to have contracted ovarian cancer because of the company’s product. A verdict of $ 2 billion in this case stands.
Johnson & Johnson denies that its talcum products cause cancer. It halted sales of talc products in the United States and Canada.