Carrier Global Corporation (NYSE:CARR) has entered into a series of settlement agreements related to its historical manufacture and sale of aqueous film-forming foam (AFFF), according to a recent 8-K filing with the Securities and Exchange Commission. The agreements aim to resolve ongoing and future litigation claims against the company.
On October 18, 2024, Carrier, a company specializing in air conditioning, heating, and refrigeration systems, announced that it had reached a Settlement and Plan Support Agreement (PSA) with KFI Wind-Down Corp. and other related parties. KFI, a former entity of United Technologies Corporation (NYSE:RTX) (UTC), manufactured and sold AFFF, a product linked to environmental and health concerns due to its per- and polyfluoroalkyl substances (PFAS) content. Carrier was spun off from UTC in April 2020, inheriting certain liabilities, including those related to AFFF.
The PSA includes three proposed settlements: one addressing estate claims, which would resolve Carrier's responsibility for any liabilities arising from KFI's AFFF business, and two direct claims settlements, which deal with claims alleging that UTC's conduct caused harm to AFFF claimants. Carrier has agreed to indemnify UTC for these direct claims as part of its spin-off arrangement.
Carrier will pay a total of $615 million over five years, contribute the net sale proceeds from the sale of KFI's assets (estimated at $115 million), and the right to recover proceeds from certain insurance policies. The company is entitled to up to $2.4 billion in insurance proceeds and will contribute the first $125 million as additional consideration in the Direct Claims Settlements.
The settlements are subject to the approval of the U.S. Bankruptcy Court for the District of Delaware and the U.S. District Court for the District of South Carolina. They are designed to resolve a significant portion of the current and future AFFF-related claims against Carrier. However, non-settling parties may still pursue direct claims against the company.
In other recent news, Carrier Global Corporation has seen a series of significant financial and strategic developments. The company's earnings exceeded expectations with an adjusted earnings per share (EPS) of $0.87, despite a 30% drop in Viessmann's sales, thanks to robust North American HVAC demand.
In a significant step in its strategic transformation into a focused HVAC company, Carrier Global sold its Commercial and Residential Fire business to Lone Star Funds for $3 billion. The sale is expected to generate an estimated $2.2 billion in net proceeds, which Carrier plans to allocate towards share repurchases.
In terms of analyst perspectives, Stephens downgraded Carrier Global's stock from Overweight to Equal Weight while raising the price target to $85.00. Baird maintained an Outperform rating on the stock and raised the price target from $80.00 to $88.00. RBC Capital Markets also showed confidence in Carrier Global, raising its price target on the stock to $79.00 and maintaining an Outperform rating. However, Morgan Stanley (NYSE:MS) initiated coverage on Carrier Global with an Equalweight rating and set a price target of $75.00, citing potential downside risks.
Lastly, Carrier has initiated an $800 million tender offer to purchase its outstanding debt securities, aligning with its focus on managing its debt portfolio effectively. These are some of the recent developments that may interest investors.
InvestingPro Insights
Carrier Global Corporation's recent settlement agreements regarding AFFF-related claims highlight the company's proactive approach to managing legal risks. This strategic move aligns with several InvestingPro Tips that shed light on Carrier's financial health and market position.
According to InvestingPro data, Carrier boasts a market capitalization of $73.66 billion, reflecting its significant presence in the Building Products industry. The company's revenue for the last twelve months as of Q2 2024 stood at $23.7 billion, with a notable revenue growth of 11.63% in Q2 2024. This growth trajectory supports the InvestingPro Tip that "Net income is expected to grow this year," suggesting that Carrier is well-positioned to absorb the settlement costs while maintaining financial stability.
Moreover, Carrier's ability to navigate these legal challenges is further supported by its solid financial foundation. The company "Operates with a moderate level of debt," as indicated by an InvestingPro Tip. This prudent financial management may have contributed to Carrier's capacity to commit to the $615 million settlement payment over five years without significantly impacting its operations.
Investors looking for more comprehensive analysis can find 13 additional InvestingPro Tips for Carrier Global Corporation, offering deeper insights into the company's financial health and market performance.
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