Reckitt Benckiser: Dettol producer shares plunge on baby formula fears
Shares in consumer giant Reckitt Benckiser closed down 8.76 per cent after a US jury found its rival, Abbott Laboratories, had failed to warn consumers about the health risks of its baby formula.
Abbott, the maker of the Similac formula, has been ordered to pay $495m (£386m) in damages.
It was the latest decision in a series of lawsuits against Abbott and Reckitt over their baby formulas, with Reckitt being ordered to pay $60m (£47m) in a similar case earlier this year. Nearly 1,000 lawsuits are pending against the companies in the US.
Plaintiffs have argued that the formula causes bowel disease in premature babies, specifically necrotising enterocolitis – a life-threatening gastrointestinal disease.
Shares had dropped to an 11-year low of 4,067p by 10:30am.
Last week, Reckitt announced an ambitious £1bn turnaround plan, which included shedding brands like Cillit Bang and Air Wick. Mead Johnson is also set for the chopping block.
“The more setbacks for either baby formula maker, the more complicated it becomes for Reckitt to sell its nutrition arm. Reckitt last week indicated it might be up for sale, saying it was considering all options for the business,” AJ Bell analyst Dan Coatsworth said.
“Any potential buyer could be put off by the possibility of liabilities from the court cases, meaning the pressure is growing for Reckitt to find a way to ringfence a large amount of money in case it loses big time in the court battles,” he added.
City PM has approached Reckitt for comment.