AbbVie's premium bid for Allergan isn't enough for one investor, who's suing to block it

lawsuit and book
An Allergan investor filed a proposed class action suit to try and block the AbbVie buyout. (Getty/eccolo74)

Allergan encountered years of setbacks before AbbVie swooped in this summer to purchase the company for a whopping $63 billion. But one small-time Allergan investor isn’t happy with the deal—and wants to rally other investors in a class-action suit to block it.

In a New Jersey lawsuit, shareholder YuanLan Swei says the proxy statement detailing AbbVie’s proposed Allergan buyout omits key info for shareholders and sets its top managers up for big payouts that could taint their decision-making about the deal.

For instance, the proxy “fails to disclose and quantify the estimated amount and timing of cost savings and related expenses and synergies,” Swei’s lawsuit claims. The proxy also doesn’t disclose specific numbers included as part of J.P. Morgan’s financial review of the proposed transaction, the suit says.

Plus, Allergan's board and executive team have a conflict of interest in recommending the deal, the suit says, given their hefty severance payouts.

Allergan CEO Brent Saunders is set to make $39 million through the buyout, while several other execs are in line for multimillion-dollar payouts, according to the securities filing detailing the terms of the deal.

“The board and the company’s executive officers are conflicted because they will have secured unique benefits for themselves from the proposed transaction not available to plaintiff and the public stockholders of Allergan,” the lawsuit says.   

The proxy also doesn’t include detailed information about whether Allergan’s managers will take up roles in the combined drugmaker and any related negotiations. 

RELATED: Allergan CEO Saunders lines up for $39M parachute after AbbVie buy 

According to the lawsuit, Swei bought 40 shares in 2015 and sold half of them in 2016. She's sued on behalf of similarly situated investors who could join the class and wants a court to delay the shareholder vote until key information is released.

AbbVie agreed to buy Allergan in June, offering $188 per share, or a 45% premium to the company's shares at the time. It was a price and a deal that analysts assessed as a boon for Allergan shareholders.

Wells Fargo analyst David Maris called the deal a “graceful exit” from Allergan’s perspective, as the company had been hit by R&D setbacks, activist investor pressure and more. RBC Capital Markets analyst Randall Stanicky called it a “welcome exit” because Allergan had been expected to pursue a breakup to unlock value, but the buyout would achieve that goal much quicker.  

Meanwhile, unions and public interest groups are looking to challenge the buyout. They recently urged the FTC to give the proposed takeover a close look, given the two companies' competitive behavior in the past.

The companies have historically used price hikes, controversial rebate deals and aggressive patent enforcement strategies to hinder competition, the groups said in their letter. And the combined company—set to be the fourth-largest drugmaker in the world—would have more power to continue that sort of behavior, they said.

RELATED: Hey, FTC, unions say: AbbVie-Allergan deal needs close look after 'anticompetitive' history 

For AbbVie, the buyout allows the company to diversify and prepare for forthcoming Humira biosimilars. For Allergan, the deal allows the company an exit after its stock price slid more than 60% in recent years before the buyout announcement.