Investors Say Falsehoods in SEC Docs Marred CVS-Aetna Merger

(CN) – Shareholders claim in a class action that CVS Healthcare Corp. misled investors about its merger with Aetna Inc. and acquisition of Omnicare.

Filed by City of Warren Police and Fire Retirement System in Rhode Island Superior Court, the action is on behalf of investors who purchased CVS stock traceable to a registration statement filed in connection with CVS’s November 2018 merger with healthcare company Aetna.

According to the lawsuit, CVS issued approximately 274.4 million new shares of CVS stock to former Aetna investors based on a registration statement filed with the Securities Exchange Commission rife with “false and misleading financial results, trends and metrics.”

In addition, the lawsuit alleges that the documents touted the success of CVS’s 2015 acquisition of Omnicare though by the time the Aetna merger rolled around, CVS’s financial condition was “severely deteriorating as a result of rising costs and poor results associated with the Omnicare acquisition.”

Shareholders claim CVS was required to disclose such details in the registration statement but neglected to do so.

“With the benefit of these misrepresentations and omissions in the registration statement, defendants were able to complete the merger,” the lawsuit alleges.

On Feb. 20, 2019, CVS announced lower than expected guidance for 2019, and also revealed an additional $2.2 billion goodwill impairment attributed to “industry wide challenges” impacting the company’s ability to expand on the Omnicare acquisition.

Following the news, CVS shares fell $7.53 to close at $62.35 per share on Feb. 21, 2019, and continued to decline the over the following days and weeks, trading as low as $52.36 per share by commencement of this action, the lawsuit states.

The class is represented by Thomas W. Lyons III of Strauss Factor Laing & Lyons in Providence, R.I.; Thomas L. Laughlin, IV, Donald A. Broggi and Rhiana L. Schwartz of Scott+Scott Attorney At Law LLP in New York and Thomas C. Michaud of Vanoverbeke, Michaud & Timmony, P.C. in Detroit.

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