The U.S. Securities and Exchange Commission filed an insider-trading lawsuit accusing three Swiss entities of suspicious trading in Arch Chemicals Inc. before the company agreed on July 11 to a $1.2 billion takeover by Switzerland's Lonza Group AG.
According to Monday's complaint, Compania Internacional Financiera SA, Coudree Capital Gestion SA and Chartwell Asset Management Services realized millions of dollars in profit from buying more than 1 million Arch shares in the week prior to the announcement, and selling their shares once the news came out.
Arch shares rose 21.4 percent to $42.17 in the week ending July 8, before Lonza on July 11 said it would buy the Norwalk, Connecticut-based company for $47.20 per share. The shares rose another 12.4 percent that day, closing at $47.37.
According to the SEC complaint filed in Manhattan federal court, CIF and Coudree, each controlled by the Turkish national Yomi Rodrig, bought 612,000 Arch shares in the week before the takeover, while Chartwell bought 425,300 Arch shares.
The SEC said these "highly profitable and suspicious" purchases were based on material, nonpublic information about the takeover. It seeks to freeze the defendants' assets and have the defendants give up illegal gains and pay civil fines.
"We're going to defend this action," said Ira Lee Sorkin, a lawyer for CIF and Coudree. "The SEC claims that the trades were suspicious, but suspicious trades do not make for insider trading." Rodrig was not charged.
A Chartwell spokesman declined to comment. Arch spokesman Dale Walter declined to comment, and Lonza was not immediately available for a comment.
CIF and Rodrig in 2005 agreed to pay $6.32 million to settle an SEC lawsuit accusing them of violating rules to bar short sales of stock just before that stock begins trading. Neither admitted wrongdoing.
The SEC said the defendants in the Arch case operate from Geneva, though CIF is a British Virgin Islands-based offshore investment vehicle.
Arch sells water treatment chemicals, hair and skin-care products, and preservation and protection applications for paint and building products.
Its takeover would make Lonza the world's largest company in microbial controls, which involves the destruction of disease-carrying micro-organisms.
The case is SEC v. Compania Internacional Financiera SA et al, U.S. District Court, Southern District of New York, No. 11-04904.
© 2015 Thomson/Reuters. All rights reserved.