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By Svea Herbst-Bayliss
BOSTON (Reuters) - Hedge fund Elliott Associates may take legal action against pharmaceuticals company AbbVie Inc (N:ABBV) for scuttling a merger deal with Shire Plc (L:SHP).
Elliott said in a quarterly letter to investors that it was disappointed when AbbVie's board withdrew its support for the deal in October after executives had signalled strong interest in late September.
The $25.4 billion (15.89 billion pound) New York-based hedge fund founded by Paul Singer holds 7.85 million shares of Shire, according to a regulatory filing made on Oct. 15.
"We are exploring our options with respect to this matter, including whether to assert claims against AbbVie for making false and misleading statements about the transaction," the fund wrote in the letter, which was seen by Reuters.
Elliott Associates said it made money on its Shire position in the third quarter, but suffered a loss in the fourth quarter when the share price tumbled on news the deal would collapse.
The AbbVie-Shire deal was a so-called inversion transaction in which the acquiring company moves its headquarters to its target's home base to take advantage of lower tax rates.
The U.S. government threw cold water on these deals in September when it issued rules limiting the tax benefits.
Elliott said these changes should not have influenced the prospects for the AbbVie Shire tie-up.
"While the Treasury regulations reduced the attractiveness of the transaction to AbbVie, it would have been significantly accretive to AbbVie while preserving the aforementioned strategic benefits," the letter said.
An Elliott spokesman declined to elaborate further. An AbbVie official did not immediately respond to a request for comment.
Elliott is closely watched in the hedge fund industry, both for its strong returns and its willingness to wage lawsuits.
The fund gained 7.6 percent for the year through the end of September and rose 2.9 percent during the third quarter. It did not say how much the bet on Shire helped during the third quarter or hurt more recently.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis, Chizu Nomiyama and Andre Grenon)