An explosion at Albright & Wilson's plant in Charleston, South Carolina, in June 1991 killed nine people and injured 33 others.
The latest development cast a pall over A&W's Stock Exchange dbut. On Wednesday, the first day of trading in the shares, they closed at 162p, at a premium to the 150p offer price. But that was far below the 190p Tenneco had sought in initial discussions with investors. The shares closed the week at 162.5p.
Although the weak new issues market was blamed for the climbdown over pricing, A&W's unquantifiable litigation exposure also contributed.
Dana Meed, the boss of Tenneco, the US oil and gas pipeline company, and owner until last month of A&W, was criticised in public last week by Mrs Melissa Grimes, wife of one of the victims. At a public lecture given by Mr Meed in Charleston she rebuked him for the company's failure to compensate the victims,
Mrs Grimes asked why Tenneco's management had failed to heed warnings that the A&W plant had potential safety problems. Mr Meed was reportedly nonplussed, before replying that following the explosion, $20m (£12.5m) had been invested to modernise the plant.
He declined to answer her next question, as to why, given Tenneco's resources, it had chosen not to settle with the victims.
Mrs Grimes, whose husband, Frank, 36, suffered brain damage in the explosion, blamed the company's "greed" for its failure to respond, adding that if warnings had been observed, no one need have died. Mr Grimes was the only survivor among those inside the plant at the time of the explosion.
Richard Wern, a South Carolina lawyer, has filed a $500m claim against A&W and Tenneco on behalf of Mr Grimes. That suit has been passed for appeal to the South Carolina Supreme Court, and should be heard sometime between June and October this year. Another lawyer, Richard Rosen, is trying to bring a class action against the company on behalf of 200 businesses and residents for damages allegedly sustained in the explosion.
In A&W's prospectus, the company says it has provided for legal action, and that "if any of the outstanding claims were to succeed, any compensation [would not] have a significant effect on the group's financial position".
The City says the company's core businesses are well-managed and attractive, but has tempered its enthusiasm with caution in view of the legal actions.
Charles Lambert, chemicals analyst at brokers Smith New Court, says A&W's potential liability is "one of those great imponderables. Until the legal process has wound through to a conclusion, we just don't know how much money is involved." He noted that most would be covered by insurance, although insurance premiums would soar if a big payment were awarded.Reuse content