Sun pharma gets fresh support in Taro battle

Advisory firm calls for vote against Taro board’s proposals

Sun Pharmaceutical Industries is getting more support from independent advisory firms in its battle to acquire Israeli drug major Taro Pharmaceutical Industries.

Leading independent proxy advisory Glass, Lewis & Co — which has more than 18,000 customers in over 80 countries — has recommended a vote against the proposals of the Taro board of directors at the annual general meeting (AGM) slated for December 31.

There are three resolutions for which approval has been sought from the shareholders — re-election of eight directors, nomination of two external directors and grant of legal indemnification to some of its current and former directors.

Three days ago, another investment advisory firm Proxy Governance had asked the shareholders of Taro to reject the proposals in the forthcoming AGM.

In its report dated December 21, 2009, Glass Lewis cited the Taro board’s failure to file its annual reports for financial years 2006, 2007 and 2008 and its twice-restated financial statements for financial years 2004 and 2005 as proof that the board is “unable to fulfill its responsibilities to shareholders,” Sun Pharma said in a press release.

The Indian pharmaceutical company is currently the largest shareholder in Taro with a 36 per cent stake.

Referring to the eight incumbent directors who will face a re-election, Glass Lewis advised that Taro’s “shareholders should hold them accountable” for their “serious disservice to shareholders” by voting against them at the annual meeting.

“The presence of new directors on the board might provide fresh perspective and a much needed transparency in the operation of the company,” Glass Lewis said.

The firm has identified additional corporate governance and disclosure problems, including lack of disclosure regarding members of board committees and the number of times such committees met, the release said.

Glass Lewis was “especially concerned about the lack of disclosure regarding the audit committee,” noting that without such disclosures, it is not possible to ascertain such fundamental issues as the existence of proper oversight of the company’s accounting, financial reporting and internal and external audits.

Sun also suggested Taro shareholders follow the professional advice of Glass Lewis and Proxy Governance and vote against the re-election of the incumbent directors and their nominees for external directors and against the board’s indemnification proposals by signing, dating and returning their proxy cards immediately.