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IBM investor claims in suit microchip unit was overvalued
[NEW YORK] International Business Machines was sued by a Michigan public pension fund that claimed the company misled investors about the value of its microchip manufacturing business before agreeing to sell it at a loss.
The City of Sterling Heights Police & Fire Retirement System sued IBM in Manhattan federal court Monday, alleging the company's shares dropped when IBM announced it would take a US$4.7 billion charge as part of a planned deal in which it would pay Globalfoundries US$1.5 billion to take the unit off its hands.
The pension plan claimed IBM had been seeking a buyer for the microchip operations since 2013 as part of a plan to sell its hardware businesses. It claimed IBM failed to properly account for the decline in value of the unit, which included manufacturing plants in East Fishkill, New York, and Essex Junction, Vermont.
The improper valuation of the microchip business artificially propped up IBM stock until October 2014, when the agreement with Globalfoundries, owned by an investment arm of the government of Abu Dhabi, was announced, according to the complaint.
In addition to IBM, its chief executive officer, Virginia Rometty, chief financial officer, Martin Schroeter, and Controller James Kavanaugh were also sued.
Doug Shelton, a spokesman for Armonk, New York-based IBM, didn't immediately respond to a phone message and an e-mail seeking comment on the suit.
The case is City of Sterling Heights Police & Fire Retirement System, 15-cv-01513, US District Court, Southern District of New York (Manhattan).