Engineering group ABB moved to draw a line under its asbestos woes by agreeing to pay an additional $232 million to claimants, removing a major hurdle on its way back to financial health and boosting its shares. The money - less than some in the market had feared - comes on top of the $1.2 billion which ABB had already agreed to contribute to a settlement under an original plan which was thrown out by a US court late last year.
ABB's shares jumped more than 6 percent on Monday amid hopes the company can now wrap up its asbestos problems after years of legal wrangling, and focus on improving profitability.
"The success of this plan is essential if ABB is to rid itself of its exposure to asbestos lawsuits ... we now believe that ABB has a high probability of succeeding," Helvea analyst Alessandro Migliorini said in a note.
The stock was up 6.2 percent at 7.58 francs by 1315 GMT in a slightly firmer Swiss market. It is trading at a multiple of 14.4 times estimated 2006 earnings - a 2 percent discount to its peers, according to Swiss bank Sarasin.
"The mid-term outlook for ABB is slightly better because the company can now concentrate on its core businesses," Sarasin analyst Andreas Riedel said in a note.
Debt markets also welcomed the news, and the cost of insuring against a default by ABB dropped 10 basis points to around 87 basis points. That means it costs 87,000 euros a year to insure 10 million euros of ABB debt against default.
"They're getting rid of the uncertainty hanging over them," a debt trader said. "That had put a delay on them getting back to investment grade, but they're back on track now."
Settling the asbestos issue is also key to achieving the firm's $4 billion debt target in 2005.