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Business

Ackman pays $194M to settle suit with ‘absolutely no merit’

By
Carleton English
Published Dec. 29, 2017
Updated Dec. 29, 2017, 10:43 p.m. ET

Bill Ackman said he’s shelling out $194 million to settle a three-year-old lawsuit — even as he insisted the case against him has “absolutely no merit.”

The billionaire investor revealed Friday his hedge fund Pershing Square Capital will pay the eye-popping sum to settle lawsuits related to its controversial investment in Botox maker Allergan, which got slapped with insider-trading allegations from the company’s shareholders.

The case was slated for a jury trial in California in the coming weeks — creating the prospect of a media circus that could have hit Ackman’s reputation on Wall Street, which has already been sullied by a slew of colossally bad calls, experts said.

“This could have been very embarrassing, as to the layman it sounded like insider trading —and arguably it was,” John Coffee, a professor at Columbia Law School, told The Post. “That phrase is one that no hedge fund wants to see in the same sentence with its name.”

Meanwhile, the fat settlement looks paltry next to the scope of the accusations. Allergan investors sued Pershing Square and Valeant Pharmaceuticals in 2014, alleging that Ackman’s fund reaped $2.5 billion in illicit profits in Allergan stock by trading on inside information from Valeant when the scandal-ridden pharma giant attempted a takeover of Allergan.

It’s a good thing “if you can settle something for less than 10 percent of the damages and avoid trial risk,” one attorney unrelated to the case told The Post.

There are cases where a defendant “won at trial and lost thereafter” because of his name getting dragged through the mud in the papers, the attorney added.

Nevertheless, the proposed settlement — which must still be approved by the court — will widen Pershing Square’s 2017 loss by a factor of 54 percent, leaving the fund’s annual drop at 3.7 percent versus the 2.4-percent drop it was tracking earlier this week, sources confirmed.

This caps Pershing Square’s third straight year of losses as the fund shed 13.5 percent and 20.5 percent in 2015 and 2016, respectively. The fund’s latest dogs include its stake in Chipotle Mexican Grill, which suffered a 23-percent loss this year. Meanwhile, Herbalife — which Ackman has bet against — soared 40 percent.

“We continue to believe the case had absolutely no merit,” Ackman insisted Friday. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation,” Ackman said.

The settlement meant ponying up more than twice the $75 million that the hedge fund had set aside for liabilities stemming from the case.

In February, Pershing Square and Valeant agreed to split settlement costs 60-40, with Valeant paying the larger share. But that split changed earlier this month due to “different views on the desirability and timing of settling the case,” Pershing Square said Friday.

Under the proposed $290 million settlement — in which neither Pershing Square nor Valeant admits wrongdoing — Valeant is paying only $96.25 million or, 33 percent.

“Though we always have remained confident in our position and were prepared to try these cases on their merits, this agreement will eliminate disruption to our business,” Valeant CEO Joseph Papa said Friday.