TORONTO (Reuters) - Menu Foods Income Fund said on Tuesday that it had reached an agreement in principle to settle lawsuits it is facing over its massive recall of contaminated pet food last year.
The company said that parties to the so-called pet food multi-district litigation have informed a U.S. court that a “comprehensive, cross-border agreement in principle” has been reached as a result of mediation.
Menu Foods said the deal is subject to several conditions, but the parties involved have advised the court they are confident a definitive agreement can be reached.
Shares of Menu Foods were up 14 Canadian cents, or 20.3 percent, at 83 Canadian cents on Tuesday afternoon on the Toronto Stock Exchange following the announcement.
The stock has dived since the recall was first announced about a year ago, when it was trading around the C$7 level.
The firm said that the settlement amount, which was not disclosed, will be funded by the defendants, including Menu Foods and its product liability insurer.
It said its estimate for the cost of the recall is still C$55 million ($54 million).
Mississauga, Ontario-based Menu Foods stopped shipments and recalled at least 60 million packages of pet food in 2007, saying they contained contaminated wheat gluten imported from China.
The company makes foods under such labels as Iams, Eukanuba, and President’s Choice, as well as store brands sold at Wal-Mart, major grocery chains and pet stores.
The recall, first announced in March 2007, was expanded several times , becoming one of the biggest in North American history. The tainted foods were claimed to be responsible for sickening or killing hundreds of pet in North America.
The definitive terms and a motion for preliminary approval of the settlement agreement are scheduled to be filed with the U.S. District Court for the District of New Jersey on May 1, with a hearing scheduled for May 14, the company said.
A schedule for Canadian court approval has not been determined but is expected in a similar time frame.
Reporting by Leah Schnurr; editing by Rob Wilson