Sun awaits Taro's response for settlement

Israel-based Taro Pharmaceuticals, whose founders are battling a takeover, is yet to initiate talks for an out-of-court settlement with Sun Pharmaceutical Industries despite a court suggestion.

Sun Pharma is engaged in a bitter legal battle with Taro in the US and Israeli courts over the latter’s decision to terminate the $454-million merger deal, which was signed on May 18, 2007.

As part of the merger agreement, Sun had agreed to invest $60 million in cash to save US listed-Taro from bankruptcy. The Indian company had also signed an Option Agreement as part of the merger deal, which allowed Sun the option to acquire the Taro promoter’s stake at $7.75 per share in the event the deal failed.

Sun has already exercised the provisions in the option agreement to acquire the founder’s stake but is yet to conclude the process following the Israeli court directive to wait till the court studies the matter. The court subsequently asked both the parties to explore the option of a settlement.

According to sources, Taro’s management is yet to inform Sun’s top executives on their willingness to go back to the negotiation table. “We are and had always been ready for discussing the issues and resolving the differences. But, they seem unwilling,” sources said.

“We fully respect the instructions of the Supreme Court of Israel and have initiated actions to comply with these instructions. We would expect all other parties to comply with these instructions as well,” a Sun Pharma spokesperson said.

Sources noted that Sun may have to shell out more money to consummate the deal. The company may have to offer more than $7.75 a share. Sun has already bought 34.4 per cent stake in Taro from the existing shareholders, but the founders are staving off the offer.

Taro’s controlling shareholders led by Chairman Barrie Levitt has 12.5 per cent stake in the company. If the move is successful, Sun’s shareholding in Taro will increase to 48 per cent. Besides, Sun has an option to exercise conversion of 3.7 million warrants at $6 a share, which will take its shareholding to about 52 per cent with 68 per cent voting rights.