Valeant, Pershing Square settle insider trading cases for $290M

Valeant and Pershing Square agreed on Friday to a $290 million settlement over allegations of insider trading. Under the deal, Valeant is paying $96.25 million but admitting no fault.

After playing defense against insider trading allegations for several years, Valeant and Pershing Square are settling with Allergan investors for $290 million. Under the deal, Valeant will pay $96.25 million and Pershing Square will pay $193.75 million.

If accepted by the court, the deal will wrap up two class action lawsuits against the companies brought by investors who sold Allergan shares between February 25, 2014, and April 21, 2014.  

The allegations stem from Valeant's failed Allergan takeover back in 2014. The plaintiffs argued that Pershing Square's purchase of a 9.7% stake in Allergan—which the firm picked up to help facilitate a takeover—was a no-no, since the value of that stake skyrocketed after Valeant took its proposal public. 

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The payment totals are a reversal from a previous agreement between Valeant and Pershing Square. Under the earlier deal to split legal costs, Valeant agreed to pay 60% of any potential settlement. But last week, Pershing Square "acquired control of the settlement of the litigation in exchange for agreeing to pay a greater percentage," according to a release

“We continue to believe the case had absolutely no merit,” Pershing Square CEO Bill Ackman said in a statement. “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.” 

The settlement comes shortly after the defendants failed in an effort to get the charges thrown out. The case was scheduled to go to trial in January. 

Valeant CEO Joseph Papa said in a statement that even though "we always have remained confident in our position and were prepared to try these cases on their merits, this agreement will eliminate disruption to our business."

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The plaintiffs filed their first case back in December 2014, alleging Valeant tipped Pershing Square off to the fact that it was looking at buying Allergan. Pershing Square then acquired shares before the broader market knew in order to make a significant profit, the shareholders say.  

Allergan ultimately ended up selling to Actavis for $66 billion; the combined company took Allergan's moniker. Valeant and Pershing Square admitted no wrongdoing under the settlement.