What happened

Three chemicals companies with a shared corporate history have reached a major settlement in a long-running water contamination case. Investors are pleased, sending shares of Chemours (CC 2.01%) up 24%, shares of DuPont (DD 0.03%) up 8%, and shares of Corteva (CTVA 0.73%) up 4% in Friday trading.

So what

Chemours, a chemicals company, and Corteva, which makes fertilizers and other agricultural supplies, both have ties to the old DuPont chemical giant. Chemours was spun out of DuPont in 2015. DuPont then merged with Dow Chemical to form DowDuPont in 2017 before splitting into a number of businesses, including the present-day DuPont and Corteva, a few years later.

The companies are separate entities today, but they have a common legacy, and potentially legacy liabilities. A number of U.S. municipalities have long-running complaints about contaminated drinking water due to so-called "forever chemicals" that leaked into the ground when firefighting foam was deployed.

The three companies said Friday they had an agreement in principle to "comprehensively resolve" the claims. Terms call for the establishment of a $1.185 billion settlement fund, with Chemours contributing $592 million, DuPont $400 million, and Corteva about $193 million.

The settlement excludes water systems operated by the U.S. government, as well as small systems that haven't detected the chemicals in question. If too many systems opt out of the settlement, the companies said they have the right to terminate it.

Chemours was the entity that inherited most of the liabilities, and it had the most risk absent a settlement. But the municipalities had tried to tie some of the company's siblings to the claims as well, creating issues for all three companies.

Now what

The deal is subject to the approval of Judge Richard Gergel of the U.S. District Court for the District of South Carolina, where about 4,000 lawsuits involving these firefighting foams have been consolidated.

This is likely not the end of this drama for the companies. It does not appear the settlement would apply to personal-injury suits filed by firefighters and other emergency responders who were exposed to the chemicals. But it is a massive step in the right direction, and at least provides some limits on the companies' ultimate exposure.

On Friday, investors are cheering the progress.