Taro Pharma calls two EGMs to discuss accounts

Sun Pharma undecided on attending the meeting.

In a new twist to the takeover battle between Sun Pharmaceutical Industries and Israel-based Taro Pharmaceutical, the latter has convened two extraordinary general meetings next month to discuss the issues related to its pending accounts and to elect two new independent directors.

Taro Pharmaceuticals today said it had scheduled a meeting of the shareholders on September 14 at the offices of the company in Haifa, Israel, to update shareholders on the status of its financial statements for 2006-08.

Taro has not published its audited financial statements since 2006. This meeting is being held after a request by one of the minority shareholders, Franklin Templeton Investments, said Taro.

Sun Pharma, the majority shareholder in Taro with 36 per cent stake, had approached the Tel Aviv District Court on May 14, requesting that Taro and its directors be ordered to publish the audited financial statements. The court is yet to decide.

A Sun Pharma spokesperson said it was difficult to comment whether the meeting would impact the ongoing litigation in the US and Israel on the aborted merger deal with Taro and Sun’s open offer to acquire Taro. He said the company had not decided whether to attend the meeting.

In May 2007, Sun Pharma had agreed to buy Taro for $454 million, but Taro unilaterally terminated the agreement after a year, as Taro’s fortunes turned around to post profits. Following this, Sun had sued Taro in Israel and the US for not honouring the deal and launched a hostile open offer to acquire the remaining shares, invoking provisions of the merger agreement. The tender offer, which commenced in June 2008, is still pending, based on an injunction issued by the Israeli Supreme Court preventing its closure till the court takes a decision.

Taro also said it would convene another shareholder meeting on September 13 to elect two independent external directors to represent the public, as well as to ratify and approve indemnification for non-executive directors.

It is mandatory to have two independent directors as per the Israeli Companies Law and two directors of Taro retired recently, said sources.

Taro, which announced its unaudited results today, said the company estimated net sales of $181.7 million compared with $166.2 million in the same period of the previous year, a 9 per cent increase for the six months ended June 30. Operating income for the half year was $34.7 million, compared to $29.2 million for the same period in 2008, an increase of 19 per cent.

Taro said its first-half earnings for 2009 were impacted by $4.2 million of expenses related to operating its Irish facility. Earlier, Sun Pharma had objected to a move by Taro to sell this facility. “As per Taro, their 2006, 2007, 2008 and first half 2009 financials are unreviewed and unaudited,” reacted the Sun Pharma spokesperson, on Taro’s claim that its Irish operations caused losses.

Taro also said its first-half 2009 expenses included approximately $13 million in professional, consulting and other fees related to its continuing efforts to complete the 2004-2006 audits and litigation related to its former merger partner, Sun Pharmaceutical Industries.