In a memorandum opinion entered April 15 in coordinated actions captioned Southeastern Pennsylvania Transportation Authority v. AbbVie, No. 10374-VCG, and Rizzolo v. AbbVie, No. 10408-VCG (Del. Ch.), Vice Chancellor Sam Glasscock III denied demands by two stockholders of AbbVie Inc. for inspection of books and records of the company pursuant to Section 220 of the Delaware General Corporation Law because they failed to demonstrate a proper purpose for their inspections.
The stockholders’ Section 220 actions arose out of decisions by the board of AbbVie to enter into and then withdraw from a merger with Shire PLC, a company incorporated under the laws of Jersey, which is an island in the English Channel. The AbbVie board had decided to pursue a merger with Shire in part to take advantage of favorable tax treatment that it believed would result under U.S. law from AbbVie combining with Shire and effectively reincorporating itself outside of the United States. However, after AbbVie and Shire signed a merger agreement, the U.S. government announced a plan to issue new regulations under the Internal Revenue Code that would retroactively prohibit the tax advantages of that merger (and other so-called “inversion” transactions like it). Just weeks after that announcement, the AbbVie board withdrew its favorable recommendation of the merger to stockholders, and AbbVie entered into an agreement with Shire to terminate the transaction. As a result, AbbVie was obligated under the terms of the merger agreement to pay Shire a breakup fee of approximately $1.64 billion in cash (equal to 3 percent of the value of cash and shares that AbbVie was to deliver to Shire’s stockholders in the merger).
