Hedge fund sues AbbVie for scuttling $55B Shire buyout

AbbVie HQ

Two years after threatening to sue AbbVie for abandoning its $55 billion Shire buyout, hedge fund Elliott Management finally did.

The fund claims in a lawsuit that AbbVie talked up “strategically compelling” reasons for buying Shire and downplayed the tax benefits of the deal, which would have moved the company to tax-friendly Ireland, Law 360 reports.

But when U.S. tax rules changed, AbbVie walked away, strategy notwithstanding. In explaining its decision, the Illinois company only cited the Treasury Department’s new restrictions on tax inversions, Elliott’s lawsuit claims.

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And when AbbVie scuttled the deal, Shire’s stock price collapsed. Elliott held $1.28 billion in Shire shares on the day AbbVie said it was reconsidering the purchase; over the next few days, Shire’s stock plummeted by 28%.

The AbbVie-Shire merger wasn’t the only big pharma deal to be abandoned for tax-inversion reasons. Pfizer canned its $160 billion deal for Allergan last year as Treasury issued its third round of revisions to inversion rules.

Elliott doesn’t disclose exactly how much money it lost on Shire stock. The suit seeks punitive damages in addition to actual damages, without mentioning dollar figures. AbbVie disclosed the lawsuit in its quarterly filing with the Securities and Exchange Commission.

When selling the Shire deal to investors, AbbVie executives said taxes weren’t “the primary rationale” for the buyout, and they called the two companies an “excellent strategic fit,” the suit claims. The press release about the deal mentioned the tax benefits only briefly. 

Elliott has been holding up the prospect of the lawsuit since November 2014, two weeks after the deal fell through. "We are exploring our options with respect to this matter, including whether to assert claims against AbbVie for making false and misleading statements about the transaction," the fund wrote in its quarterly letter to investors.

AbbVie’s disclosure follows other inversion-focused legal action. Last week, the U.S. Chamber of Commerce sued the federal government over last April’s Treasury action. The lawsuit claims that Treasury’s changes broke the law. 

According to the lawsuit, the agency tweaked the Internal Revenue Code after Congress refused to pass legislation limiting inversions. “Instead of breaking the rules to punish companies engaged in lawful transactions, Washington should just do its job and comprehensively reform the tax code,” chamber CEO Thomas Donohue told the Wall Street Journal. Treasury said in a statement that the inversion changes were “based on strong policy interests and clear legal authority.”

- check out the AbbVie filing
- see the Law 360 coverage (sub. req.)

Related Articles:
AbbVie calls it quits on $55B Shire takeover
Shire shares are hammered as AbbVie looks to renege on $54B buyout
Allergan CEO, Treasury secretary spar over death of 'Pfizergan' deal
Pfizer's $160B megadeal for Allergan collapses under new tax rules
Treasury suits up to fight Allergan merger
Merck's Frazier disses tax inversion strategy, at least for Merck

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