Judge Signals He Will Approve $290 Million Settlement Between Allergan Shareholders and Pershing, Valeant -- Update

FeaturesDow Jones Newswires

A federal judge signaled Tuesday he would approve a $290 million settlement reached by Pershing Square Capital Management, Valeant Pharmaceuticals International Inc. and the shareholders of Allergan PLC who had alleged the two firms improperly profited from their failed attempt to buy the maker of Botox.

In a hearing Tuesday, the judge also said he intends to publicly issue a final version of his tentative opinion he had privately issued last month that rejected two key legal arguments Pershing Square and Valeant had made, saying he wanted his order to become part of legal case law, according to people familiar with the hearing.

Continue Reading Below

His views were being closely watched by hedge funds and others wondering if the trading strategy could be replicated.

The settlement was reached last month to end a suit that threatened William Ackman and Valeant's profits on their lucrative Allergan partnership, which earned them collectively about $2.6 billion, though they failed to buy the company as they intended.

The hedge fund and the pharmaceutical company tried to buy Allergan for more than $50 billion in early 2014. The hedge fund took a 9.7% stake in Allergan to try to win enough support for the deal. But the bid failed when Actavis PLC swept in with a $66 billion offer for Allergan.

Write to David Benoit at david.benoit@wsj.com and Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com

A federal judge signaled Tuesday he would approve a $290 million settlement reached by Pershing Square Capital Management, Valeant Pharmaceuticals International Inc. and the shareholders of Allergan PLC who had alleged the two firms improperly profited from their failed attempt to buy the maker of Botox.

In a hearing Tuesday, the judge also said he intended to publicly issue a final version of a tentative opinion he had privately issued last month that rejected two key legal arguments Pershing Square and Valeant had made. The judge said he wanted his order to become part of legal case law, according to people familiar with the hearing.

The judge's views were being closely watched by hedge funds and others wondering if the trading strategy could be replicated.

The settlement was reached last month to end a suit that threatened the profits of Valeant and Pershing Square founder and CEO William Ackman on their lucrative Allergan partnership, which earned them collectively about $2.6 billion, though they failed to buy the company as they intended.

The hedge fund and the pharmaceutical company tried to buy Allergan for more than $50 billion in early 2014. The hedge fund took a 9.7% stake in Allergan to try to win enough support for the deal. But the bid failed when Actavis PLC swept in with a $66 billion offer for Allergan.

The sides reached an agreement to settle last month, with Pershing Square set to pay $193.75 million and Valeant to pay $96.25 million.

Earlier this month, the judge said he had questions about the agreement and called a hearing for Tuesday, raising questions about whether he might reject it. At the hearing, the judge said the agreement was "fair to the parties" and canceled the planned trial date for next month.

"The court has vacated the trial date and indicated its preliminary approval of the settlement subject to submission of final papers and associated hearings," Valeant said in a statement.

Both Valeant and Pershing Square reiterated Tuesday the settlement was in their best interests and would allow them to put the suit behind them.

The plaintiffs, led by the State Teachers Retirement System of Ohio and the Iowa Public Employees' Retirement System, sold Allergan shares as Pershing Square was buying. They contend that Pershing Square and Valeant profited from inside information.

The suit had hinged on the rules that govern tender offers for stock. It is illegal for someone who has taken "substantial steps" toward launching a tender offer to tip off another party.

Pershing Square and Valeant say they partnered, so Pershing Square couldn't have been trading on another party's information and that they originally decided against a tender offer, so they couldn't have taken steps toward one. They later launched one.

In his tentative opinion, the judge had said the duo had both taken substantial steps and weren't legally the kinds of partners that could trade ahead of a tender offer. He had said in prior hearings that he hadn't made up his mind and could change the final ruling.

Write to David Benoit at david.benoit@wsj.com and Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com

(END) Dow Jones Newswires

January 16, 2018 18:17 ET (23:17 GMT)