Shareholders Balk at|$25 Billion St. Jude Merger

ST. PAUL, Minn. (CN) — Abbott Labs denied rumors last year that it was planning to acquire St. Jude Medical, causing shares to plunge, before buying St. Jude at a discounted price, a shareholder class action claims.

Stephen Silverman filed a class action Monday in Ramsey County District Court against the company, its board of directors and Abbott Laboratories.

Not to be confused with a children's research hospital of the same name, St. Jude Medical makes cardiovascular devices for various heart diseases, and neurostimulator devices for the management of chronic pain and movement disorders. It reported net sales of $1.45 billion for the first quarter of 2016, court records show.

Last month, St. Jude announced it had accepted an acquisition offer from Abbott Laboratories, one of the world's largest health care companies. The same day, Abbott requested to terminate its $5.8 billion pending acquisition of medical test maker Alere. This request was promptly denied by Alere's board.

Under the terms of the proposed merger, St. Jude shareholders will receive $46.75 in cash, and 0.87 shares of Abbott stock, for a total consideration of $81.50 per share.

The deal is valued at a total of $25 billion.

But Silverman says the cash offer is "woefully inadequate," given that just one year ago St. Jude stock consistently traded above $70 per share.

Prior to the merger announcement, St. Jude shares traded at approximately $55 per share. According to Monday's lawsuit, St. Jude stock reached nearly $73 per share in August 2015 on reports that Abbott was preparing to acquire the company.

"Defendants thereafter not only denied the rumors but made statements indicating that Abbott was not interested, and would not likely be interested, in acquiring St. Jude," the complaint states. "By denying a deal was in the offing, and stating that Abbott would not be interested, defendants caused St. Jude stock to fall and enabled Abbott to acquire St. Jude at a discount mere months later."

Silverman asks the court to enjoin the proposed merger, because St. Jude's board did not maximize stockholder value.

The class is represented by Garrett Blanchfield of Reinhardt, Wendorf & Blanchfield in St. Paul, Minn.

St. Jude spokesperson Candace Flippin said the company does not comment on ongoing litigation.

Abbott Labs did not immediately respond to a request for comment Tuesday.

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