Boston, MA 04/07/2014 (wallstreetpr) – Tronox Ltd (NYSE:TROX) finally reached a settlement deal with Anadarko Petroleum Corporation (NYSE:APC), ending a lengthy legal battle. Shares of TROX as those of APC gained on the news Friday.
Although the settlement was welcome by investors on both sides as could be seen from the stock price action, what Tronox received was not exactly what it was bargaining for. The company was looking for about $25 billion in compensation, arising from claims of fraudulent action by its parent company Kerr-McGee which APC acquired. However, to get $5.15 billion was a culmination of great efforts by the company to at least scoop something to offset the environmental liabilities it incurred.
Background of the settlement
Tronox Ltd (NYSE:TROX) was created as a spun-off business of Kerr-McGee. Later Kerr-McGee merged with Anadarko Petroleum. That deal enabled APC to expand its interest in the Gulf of Mexico. However, for Tronox, it resulted in shouldering of undue burden. Its parent company Kerr-McGee bequeathed it heavy environmental liabilities which led the company to filing for bankruptcy in 2009. It came out of the bankruptcy in 2011, but took issue with APC, demanding compensation.
In meeting various environmental obligations, Tronox Ltd (NYSE:TROX) demand payment of $25 billion. And what would be a lengthy legal battle was launched, finally culminating in $5.15 billion, quite a small amount for Tronox, but better than none at all.
To sum up the issue
Although Tronox Ltd (NYSE:TROX) didn’t get its way through with the huge compensation demand, the $5.15 billion settlement is expected to enable the company to meet its various obligations with creditors and also use it in cleaning up of sites. Moreover, the company is also free to direct its resources into growth and creation of value for shareholders.
Shares jumped almost 4 percent by closing bell Friday, on a day that saw above average volume of shares changing hands.
