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Allergan shareholders reach USD290m settlement with Valeant Pharmaceuticals and Bill Ackman’s Pershing Square over insider trading claims 

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Lawyers representing shareholders of Allergan Inc have settled a lawsuit resolving insider trading claims against Valeant Pharmaceuticals International, Bill Ackman and his Pershing Square family of hedge funds stemming from Valeant’s 2014 attempt to takeover Allergan.

In settling the claims, Valeant and Pershing Square agreed to jointly pay a total of USD290 million for all involved investors.
 
Allergan stockholders alleged that in February 2014, Valeant tipped Pershing Square founder Bill Ackman about its plan to launch a hostile bid for Allergan. Armed with this non-public information, Pershing then bought 29 million shares of Allergan stock from unsuspecting investors, who were unaware of the takeover bid that Valeant was preparing in concert with the hedge fund. When Valeant publicised its bid in April 2014, Allergan stock shot up by USD20 per share, earning Pershing USD1 billion in profits in a single day.    
 
Valeant’s bid spawned a bidding war for Allergan. The company was eventually sold to Actavis PLC for approximately USD66 billion.
 
Stockholders filed suit in 2014 in federal court in the Central District of California, where Judge David O Carter presided over the case. Judge Carter appointed the Iowa Public Employees Retirement System (Iowa) and the State Teachers Retirement System of Ohio (“Ohio”) as lead plaintiffs, and appointed Kessler Topaz Meltzer & Check, and Bernstein Litowitz Berger & Grossmann, as lead counsel.  
 
The court denied motions to dismiss the litigation in 2015 and 2016, and in 2017 certified a class of Allergan investors who sold common stock during the period when Pershing was buying.  
 
Earlier in December, the Court held a four-day hearing on duelling motions for summary judgement, with investors arguing that the Court should enter a liability judgment against Defendants, and Defendants arguing that the Court should throw out the case.  A ruling was expected on those motions within coming days.
 
The settlement reached last week resolves both the certified stockholder class action, which was set for trial on 26 February, 2018, and a more recently-filed action brought on behalf of investors who traded in Allergan derivative instruments. Defendants are paying USD250 million to resolve the certified common stock class action, and an additional USD40 million to resolve the derivative case.

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