Sun may sue Levitt for Taro stake

Sun Pharmaceutical’s three-year battle to take control of Israel’s Taro Pharmaceutical is far from over. The Indian company will now go all out to acquire shares from promoter Barrie Levitt and family, who hold over 40 per cent voting rights in the company.

In a statement, Sun Pharma said that it received an offer to sell 29,382 ordinary shares, which is approximately 0.07 per cent of Taro’s outstanding ordinary shares, during the tender offer.

The battle is now set to enter the next phase, which could be the final leg. Armed with last week’s favourable verdict from Israel’s Supreme Court, Sun Pharma can now initiate the last battle in courts to take control of the shares of the Levitt family.

Analysts said Taro promoters were bound to surrender their shares separately at the time the open offer closed under the provisions of an option agreement, which was part of a merger plan announced three years ago. Sun triggered the tender offer citing the option agreement, following the Taro management's decision to walk away from the merger.

“Sun is pleased to be able to finally close the offer and we will now make every effort to consummate our option agreement to purchase the Levitts’ controlling shares of Taro,” said Dilip Shanghvi, chairman and managing director of Sun Pharma.

The Levitt camp is yet to reveal its plans. The Taro promoters have the option of filing a request for a review of the Supreme Court order by a larger bench of the same court. But the current case does not appear to qualify under the usual criteria applied to cases considered fit for such a review, Shanghvi had said after consulting his lawyers in Israel.

The Levitt family owns 12 per cent stake in the company, but has a crucial 41 per cent voting rights on management decisions. Sun Pharma, the largest shareholder, owns a 36 per cent stake, but has only 23 per cent voting rights. If Sun manages to acquire the Levitts' shares, the Indian drug major will gain control of Taro with over 48 per cent stake and about 65 per cent voting rights.

Last week, Israel’s Supreme Court dismissed an appeal filed by Taro against a previous ruling by a Tel Aviv district court, holding that special tender offer rules did not apply to its subsidiary, Alkaloida Chemical Company Exclusive Group, to purchase all outstanding ordinary shares of the Israeli company. The Supreme Court also reaffirmed the district court's finding that Taro and its directors had acted in bad faith.

Meanwhile, analysts said the cold response to the tender offer was on expected lines as Sun's offer was at $7.75 per ordinary share. Taro's current Pink Sheet quote is about $11.40 a share. Pink Sheets are a daily quotation system for over-the-counter stocks. Unlike companies on a stock exchange, companies quoted on the Pink Sheet system are not mandated to meet minimum requirements or file with the US Securities & Exchange Commission.

Sun Pharma said that as announced earlier, Alkaloida has commenced a subsequent offering period for all remaining ordinary shares that have not yet been tendered. This subsequent offer period is valid until September 28.