Menu Foods to settle tainted pet food lawsuits

Kevin Bell, Bloomberg Published: Tuesday, April 01, 2008
Financial Post

Menu Foods Income Fund, the owner of the company that recalled 60 million cans of pet food last year, reached a settlement in lawsuits involving deaths or illnesses of cats and dogs from tainted products.
The agreement is subject to the approval of U.S. and Canadian courts, Menu Foods said Tuesday in a statement. Terms of the settlement in principle can't be released until the accord is finalized, Robert Merrick, a spokesman for Streetsville, Ont.-based Menu Foods, said in a telephone interview.

Menu Foods began recalling food on March 16, 2007, after some cats and dogs that had eaten its products died from kidney failure. The items were tainted with an ingredient imported from China called melamine. The settlement will be paid by Menu Foods and other makers of contaminated pet food.

Menu Foods said its recall expenses are unchanged from an estimate last year of $55 million. Some of the costs of the agreement will be paid by its insurance company.

A hearing for preliminary approval of the settlement is scheduled for May 14 in the U.S., while a Canadian court date hasn't been set yet.

Menu Foods, which is an income trust, rose 12 cents, or 17%, to 81 cents at 3:06 p.m. in trading on the Toronto Stock Exchange. Before Tuesday, the units dropped 91% since the day before the recall was announced. Income trusts avoid most corporate taxes because they pay out the bulk of their cash flow to unit holders.

The defendants included Nestle SA, Procter & Gamble Co., Wal-Mart Stores Inc. and PetSmart Inc., according to a court filing in the U.S. District Court in Camden, New Jersey. Court records show that 116 cases are pending before U.S. District Judge Noel Hillman.