NEW YORK–(BUSINESS WIRE)–Robbins Geller Rudman & Dowd LLP (http://www.rgrdlaw.com/cases/cvshealth/) today announced that a class action has been commenced by an institutional investor on behalf of all former Aetna Inc. shareholders who acquired CVS Health Corporation (NYSE:CVS) shares in exchange for their Aetna shares in connection with CVS’s acquisition of Aetna on November 28, 2018. This action was filed in the District of Rhode Island and is captioned Waterford Township Police & Fire Ret. Sys. v. CVS Health Corp., et al., No. 19-cv-00434.
The Private Securities Litigation Reform Act of 1995 permits any former Aetna shareholders who acquired CVS shares in exchange for their Aetna shares in connection with CVS’s acquisition of Aetna to seek appointment as lead plaintiff. A lead plaintiff acts on behalf of all other class members in directing the litigation. The lead plaintiff can select a law firm of its choice. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff. If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Samuel H. Rudman or David A. Rosenfeld of Robbins Geller at 800/449-4900 or 619/231-1058, or via e-mail at [email protected]. You can view a copy of the complaint as filed at http://www.rgrdlaw.com/cases/cvshealth/.
The complaint charges CVS and certain of CVS’s and Aetna’s officers and directors with violations of the Securities Act of 1933. CVS provides retail pharmacy and pharmacy benefit manager services nationwide. On May 20, 2015, CVS Pharmacy, Inc., a wholly owned subsidiary of CVS, entered into a merger agreement to acquire Omnicare, Inc., a provider of pharmaceuticals and related pharmacy services to long-term care (“LTC”) facilities (e.g., assisted living, skilled nursing, and senior centers) and a provider of specialty pharmacy and commercialization services for the bio-pharmaceutical industry.
In connection with the acquisition of Aetna (the “Acquisition”), defendants filed with the SEC a Registration Statement on Form S-4, which was declared effective on February 9, 2018, and a joint proxy statement/prospectus on Form 424B3 (collectively the “Offering Documents”). The complaint alleges that the Offering Documents contained materially false and/or misleading statements about CVS’s compliance with Generally Accepted Accounting Principles (“GAAP”). In particular, CVS falsely represented in the Offering Documents that it had properly accounted for its $6+ billion goodwill asset, as reported in the “LTC unit,” associated with CVS’s 2015 acquisition of LTC pharmacies of Omnicare.
In March 2018, CVS raised $40 billion in debt securities to help fund the cash component to be paid to Aetna shareholders. The balance of consideration due to Aetna shareholders would be paid in shares of CVS stock. On March 13, 2018, Aetna shareholders approved the Acquisition (including the provisions whereby Aetna shareholders would exchange their Aetna shares for CVS shares). The complaint alleges Aetna shareholders approved the Acquisition not knowing that CVS’s reporting of its goodwill asset was not GAAP-compliant, that the Omnicare-related goodwill was materially impaired, and that the price of CVS shares was materially inflated.
After the Aetna shareholders had approved the Acquisition, in August 2018, CVS disclosed it was “clearly disappointed with [the] performance in the Omnicare business” and that, since the third quarter of 2017, CVS had been “closely monitoring the performance of the [Omnicare] business for potential indicators of impairment.” As a result of that “disappointment” and “close monitoring” since 2017 that triggered belated “updated” forecasts, CVS announced a goodwill impairment charge of $3.9 billion to be recognized in the second quarter of 2018.
On November 28, 2018, the defendants announced that the Acquisition was formally closed, with Aetna shareholders receiving CVS stock valued at $80 per share.
In late February 2019, CVS announced a second multi-billion-dollar impairment charge to its Omnicare-related goodwill, this time a $2.2 billion impairment to be recognized in the fourth quarter of 2018. CVS cited “operational challenges” as a basis for this second massive charge. On this news, the price of CVS shares fell to the mid-$50 range. Currently CVS stock is trading below $59 per share, representing a more than 27% decline from the approximately $80 per share the stock was trading at when exchanged for Aetna shares in the Acquisition.
Plaintiff seeks to recover damages on behalf of any former Aetna shareholders who acquired CVS shares in exchange for their Aetna shares in connection with the Acquisition (the “Class”). The plaintiff is represented by Robbins Geller, which has extensive experience in prosecuting investor class actions including actions involving financial fraud.
Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities litigation. With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history. For six consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements. Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims. Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide. Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry. Please visit http://www.rgrdlaw.com for more information.
Robbins Geller Rudman & Dowd LLP
Samuel H. Rudman, 800-449-4900
David A. Rosenfeld