Pershing and Valeant to pay $290m to settle case over Allergan bid

Bill Ackman’s companies agree to split payout to avoid litigation

Bill Ackman, founder and chief executive  of Pershing Square Capital Management. Photographer: Scott Eells/Bloomberg

Bill Ackman, founder and chief executive of Pershing Square Capital Management. Photographer: Scott Eells/Bloomberg

 

Activist investor Bill Ackman’s Pershing Square Holdings and Valeant Pharmaceuticals International agreed to pay $290 million (€240 million) between them to settle investor claims that they engaged in insider trading in the unsuccessful 2014 takeover bid for Botox-maker Allergan.

The deal requires the approval of a US judge in California.

In the end, the two companies agreed to divide the payout, with Pershing Square paying $193.75 million (€160 million) toward the settlement and Valeant paying $96.25 million (€80 million).

“We continue to believe the case had absolutely no merit,” Mr Ackman said. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation.”

Allergan’s shareholders claimed in the lawsuit that they were tricked when Mr Ackman bought their shares with the secret knowledge Valeant was planning a hostile bid. Pershing Square made a paper profit of more than $2 billion (€1.66 billion) on its Allergan investment when Actavis ended up buying the company, which had rejected Valeant’s takeover offers.

Settlement

The case had been scheduled to go to trial on January 30th.

“This settlement not only forces Valeant and Pershing to pay back hundreds of millions of dollars, it strikes a blow for the little guy who often believes, with good reason, that the stock market is rigged by more sophisticated players,” Lee Rudy, a lawyer representing the lead plaintiffs, said in a statement.

Pershing Square had originally set aside $75 million (€62.2 million) for the lawsuit.

The settlement puts an end to Mr Ackman’s and Valeant’s strained relationship. After the initial profit their partnership made on the Allergan investment, Pershing Square lost $4.2 billion (€3.49 billion) on its subsequent investment in Valeant, and Ackman fell out with the Canadian drugmaker’s former chief executive, Mike Pearson.

– Bloomberg