The paper-goods giant announced it has settled a pair of lawsuits stemming from the Safeskin acquisition. The all-stock deal completed back in 2000 was tax-free, but taxing allegations soon surfaced that Safeskin's directors weren't acting in the company's best interest to maximize shareholder value. While these kinds of class-action lawsuits are common, and more often the work of sour grapes, Safeskin investors had a right to expect more.
Kimberly-Clark's proposed purchase price was a third less than what the shares were fetching just months earlier, before Safeskin got rocked after restating its 1998 results. Sure, like a pricked glove, the company was damaged goods after that. Still, BT Alex Brown issued a report stating that even in the worst of cases, the company would still be worth between $15 and $19 a share in a buyout situation. Kimberly-Clark offered closer to $13 in the stock deal, and Safeskin didn't hold out for higher bids or shore up operations to command a higher ransom later.
In retrospect, the $55 million settlement may be a cheap price to pay for Kimberly-Clark to lay the securities and shareholder derivative lawsuits to rest. It's just a buck more for each of the 55 million Safeskin shares outstanding, and the company will only take a $21 million pre-tax charge -- or just $0.03 a share -- as its insurance will cover the bulk of the settlement.
For a company that prides itself on owning the top brands in its conglomerate empire, it's little more than a slap on the wrist for the right to own the top dog in the $3 billion disposable glove market.