GLOBAL - Bank of America Corporation (BAC) has reached a $2.4bn (€1.9bn) settlement with pension funds including Dutch healthcare scheme PFZW and AP4 over “materially false” statements surrounding its acquisition of Merrill Lynch.
The lawsuit, filed in the wake of the acquisition finalised in 2009, alleged that current and former directors of BAC and Merrill Lynch violated US securities laws “by making a series of materially false statements and omissions” regarding losses suffered by Merrill Lynch prior to a “pivotal” shareholder vote.
The plaintiffs - including also the $64.6bn State Teachers Retirement System of Ohio, the $61bn Ohio Public Employees Retirement System and the $106bn Teacher Retirement System of Texas - also alleged that BAC and Merrill Lynch failed to disclose an agreement allowing $5.8bn in bonuses to be paid out to the latter’s staff despite the undisclosed losses at the bank.
Eloy Lindeijer, investment management chief at PGGM Investments, representing PFZW’s interests in the suit, hailed it as a “landmark recovery” for Bank of America shareholders.
“The settlement sends a strong message to all companies concerning the paramount importance of conducting a fully informed shareholder vote on corporate acquisitions and mergers,” he said.
AP4 chief executive Mats Andersson added: “This is a settlement of historic proportions for BAC investors, who were denied their fundamental right to vote on an informed basis on significant corporate transactions, or who purchased in the open market without full information.”
Commenting on the settlement, BAC added that, once approved by the court, the agreement would also see the bank implement a number of corporate governance changes.
Its chief executive Brian Moynihan said the resolution of the $2.43bn lawsuit had removed “uncertainty and risk” and was in the best interests of shareholders.
Weeks after the acquisition of Merrill Lynch by BAC was finalised in 2009, the bank revealed $15bn in fourth-quarter losses.
At the time the initial lawsuit was launched, PGGM chief investment officer Johan van der Ende said he believed the five participants had “a duty to represent global investors’ interests by striving for adequate loss recovery for all shareholders”.
Once the settlement has been agreed, BAC’s payment will come in addition to $150m previously recovered by the US Securities and Exchange Commission.