AbbVie dodges hedge fund lawsuit over failed $ 55 billion Shire lawsuit
AbbVie has not been short of criticism and questioning over its decision to drop its $ 55 billion Shire buyout in 2014. But after years of legal back-and-forth, the company has escaped a High-profile hedge fund case which alleged the company has misled them about its true intentions.
When AbbVie unveiled its proposed deal with Shire in July 2014, the company cited “strong strategic rationale” for the move, and not just the tax benefits of acquiring an Irish drugmaker. But shortly after the US Treasury Department put new rules in place in September 2014 to crack down on controversial so-called tax reversals, the company backed out of the merger.
This sequence of events resulted in heavy losses in hedge funds, which then sued AbbVie for fraud. In their lawsuits, the hedge funds said they bought Shire shares in hopes the deal would go through, but suffered losses when AbbVie pulled out of the deal in October 2014. They said AbbVie’s public statements did not match his private intentions to sue Shire.
In a ruling on Monday, Cook County Circuit Judge Margaret A. Brennan ruled in AbbVie’s favor, granting summary judgment and dismissing the hedge fund claims. The plaintiffs were “kind of rolling the dice, hoping to make some money” by buying Shire stock after the buyout was announced, the judge said. They “had to do their own analysis” and “should be aware that there was a possibility that this would not materialize,” she added.
Representing AbbVie, Gabor Balassa of law firm Kirkland Ellis said the company’s statements on merger talks, before and after the July 14, 2014 announcement, contained caveats and opinions on the proposed deal. , not statements of fact.
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Hedge funds saw it differently. Representing the plaintiffs, Robert B. Tannenbaum of Bartlit Beck said AbbVie had “on several occasions” told its clients that the deal was “not driven by tax benefits” but was “strategically and financially. convincing far beyond the tax advantages “. This did not match the company’s hidden beliefs, Tannenbaum told the court, as evidenced by the company’s decision to withdraw from the deal after the US Treasury Department rolled out its anti-reverse rules.
Even after the US Treasury Department released these rules, AbbVie CEO Richard Gonzalez noted in a note to Shire employees that he was “more confident than ever in the potential of our combined organizations,” said Tannenbaum.
Behind the scenes, AbbVie executives sought the deal primarily for tax purposes, Tannenbaum said. At the time, tax reversals were “extremely controversial and almost universally unpopular.” In this environment, AbbVie developed a “messaging strategy”, he said, to talk about the most favorable aspects of the deal.
AbbVie pursued this false messaging strategy to minimize the government’s scrutiny of the deal, avoid damaging long-term reputation as tax evasion, and avoid losing the essential support of Shire shareholders for the deal, ”Tannenbaum said.
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In 2016, hedge fund Elliott Management sued AbbVie for the failed merger, and other funds followed their own lawsuits in subsequent years. The discovery in litigation went on for years, with attorneys taking nearly 100 depositions.
In another case, AbbVie settled with Shire shareholders in 2019 for an undisclosed amount.
After AbbVie and Shire parted ways during their talks, Takeda ended up buying the Irish drugmaker in 2018 for $ 62 billion. AbbVie, for its part, marked another mega-merger with its massive buyout of Allergan. AbbVie and Allergan merged last May in a $ 63 billion deal.