Direct Action Litigation Against Perrigo
Status: Ongoing Case
Labaton Sucharow LLP filed two lawsuits on behalf of two groups of investment funds (the plaintiffs) against Perrigo Company, PLC, and certain of Perrigo’s current and former senior executives and directors (collectively, the defendants), arising from fraudulent activity in connection with fighting a hostile takeover by Mylan, N.V. (Mylan). The actions were filed in the District of New Jersey and are Civil Action Nos.18-cv-01119 and 18-cv-01121.
The actions generally allege that to discourage Perrigo shareholders from accepting Mylan’s offer, the defendants repeatedly made material misrepresentations and omissions about four key areas: (a) the integration and overvaluation of Perrigo’s largest acquisition, Omega Pharma N.V. (Omega); (b) Perrigo’s organic growth; (c) collusive pricing and pricing pressure in Perrigo’s most profitable division, generic drugs; and (d) the deteriorating value of Perrigo’s largest financial asset, a royalty stream for the drug Tysabri.
The plaintiffs allege violations of the federal securities laws. More specifically, they assert claims for violations of Sections 14(e) and 20(a) of the Securities Exchange Act of 1934.
As the plaintiffs’ complaints allege in greater detail, the defendants’ misrepresentations and omissions served their purpose, defeating Mylan’s takeover bid. On November 13, 2015, the tender offer was voted down by a misled majority of Perrigo shareholders, with less than 50 percent of Perrigo investors tendering shares. Because Mylan’s tender offer specified that it would proceed only if 50 percent or more shares were tendered by that date, the offer expired pursuant to its terms. As an immediate consequence of the tender offer’s failure, the plaintiffs and other Perrigo shareholders were deprived of the opportunity to tender their Perrigo common stock in exchange for the combination of cash and Mylan stock offered by Mylan through the tender offer. Thus, Perrigo shareholders, including the plaintiffs, were forced to hold onto Perrigo stock valued at $140.54 per share on November 13, 2015 (as of when the market opened), when they could have received a value of $174.36 per each Perrigo share (based upon the Mylan share price at the close on November 12, 2015) had the tender offer succeeded.
After the failure of the tender offer, the truth was revealed through a series of disclosures beginning on February 18, 2016. For example, the complaints allege that on February 18, 2016, after months of hyping its strong financial condition and prospects, Perrigo stunned investors by (a) reporting fourth calendar quarter 2015 revenue, margins, earnings and cash flow that were all below what the defendants had led investors to expect, (b) revising Perrigo’s 2016 earnings guidance downward from the guidance it issued and reiterated just weeks earlier during the Mylan offer, and (c) revealing previously undisclosed problems regarding Omega. In May 2017, Perrigo announced that its offices had been raided by the Department of Justice as part of a criminal price-fixing probe, and that Perrigo was required to restate earnings, conceding in a May 22, 2017 restatement that the balance sheets it disclosed prior to, during, and after fighting Mylan’s tender offer should have recorded billions of dollars of deteriorating fair values for the Tysabri royalty stream.