ALY - Italian dairy company Parmalat has dropped the lawsuit against Hermes Focus Asset Management Europe after reaching a settlement in the shareholder class action lawsuit for which Hermes was the lead-plaintiff.
Parmalat today confirmed it will issue 10.5m shares of stock to pay a $40m (€25.9m) settlement in a shareholder lawsuit in which Hermes was the lead-plaintiff.
The company added it has decided to settle and remove the threat of a lawsuit that has been weighing on its share price.
The Collecchio, Italy-based firm will pay as much as an additional €1m in notification costs to resolve the multi-billion-dollar suit filed in the southern district court of New York, according to a company statement today.
Law firm Grant & Eisenhofer, which represented Hermes Focus Asset Management Europe, a division of Hermes Pensions Management, and three French and Belgian bond investors in the securities class action, said it will continue pressing claims against other defendants whom the firm alleges defrauded investors prior to Parmalat's collapse in 2003.
Stuart Grant, managing partner of the firm, told IPE today these defendants include Citibank and Deloitte Touche.
Two $25m settlements were reached with Credit Suisse Group's Credit Suisse First Boston and Banca Nazionale Del Lavoro last summer so total investors recovery obtained so far in the case now stands at around $90m.
Commenting on the settlement, the Italian group said: "Parmalat believes that this settlement is in the best interests of its shareholders to avoid the distraction and expense of further litigation, and diminishes uncertainty in the value of its stock."
Parmalat said last month in its annual report it had sued Hermes Focus Asset Management Europe for more than €5bn in damages, claiming it had worsened the "financial distress" relating to the firm's collapse in 2003. (See earlier IPE story: Parmalat sues Hermes for €5bn over collapse).
Grant told IPE this counter-suit against Hermes has now been dropped, since "everything has been settled".
The company was not available for comment.
Parmalat collapsed in December 2003 in the Italy's largest bankruptcy, later disclosing a debt of more than €14bn - about eight times the amount reported by its former management.
Italian prosecutors filed criminal charges after discovering that the company had never earned a profit after its stock market listing in 1992, despite reporting earnings every year.
The developments prompted the US Securities and Exchange Commission (SEC) to dub the Parmalat case as "one of the largest and most brazen financial frauds in history".
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