Class Action Seeks to Reveal Allegedly Missing Details Regarding Allergan, AbbVie Merger

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Allergan PLC is on the receiving end of a proposed class action lawsuit centered on a potential merger with AbbVie, Inc., the details of which the case alleges were not fully disclosed to stockholders.

Filed against the two companies, Allergan’s board of directors, and Venice Subsidiary, LLC, the 16-page lawsuit out of Delaware claims a proxy statement submitted to the SEC by the defendants on September 16, 2019 omitted material information about the approximately $63 billion transaction. 

Among the missing information, the suit says, were details regarding Allergan and AbbVie’s financial projections. Specifically, the lawsuit claims the proxy statement failed to disclose all line items used to calculate both companies’ EBITDA (earnings before interest, tax, depreciation and amortization) and unlevered free cash flow, as well as a reconciliation of all non-GAAP to GAAP metrics. According to the lawsuit, the disclosure of such values is necessary for stockholders to determine whether the transaction is fair in light of Allergan’s projected future value.

The lawsuit further claims the proxy statement was missing key figures underlying the financial analyses performed by advisor J.P. Morgan Securities LLC in connection with the transaction.

“When a banker’s endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed,” the complaint reads.

Lastly, the lawsuit points out possible conflicts of interest among J.P. Morgan and Allergan’s board of directors, adding that the proxy statement failed to supply details that would allow shareholders to determine whether the parties were acting in their best interests. Specifically, the proxy statement allegedly omitted the amount of compensation and financial benefits J.P. Morgan would receive for “acting as an agent bank and lender under outstanding credit facilities” of both Allergan and AbbVie. Similarly, the defendants, the case alleges, failed to disclose the timing and nature of communications regarding the future employment of members of Allergan’s board of directors.

“This information is necessary for stockholders to understand potential conflicts of interest of management and the Board,” the complaint explains, “as that information provides illumination concerning motivations that would prevent fiduciaries from acting solely in the best interests of the Company’s stockholders.”

The lawsuit demands that the allegedly missing information be disclosed before a stockholder vote scheduled to take place on October 14, 2019.