Sun closer to Taro buy

Israeli company loses plea for special tender offer in local court.

India’s Sun Pharmaceutical Industries, which is attempting a hostile takeover of Israeli drug major Taro Pharmaceutical, has said Taro lost a plea seeking a special tender offer for buying its shares under the country’s law.

The rejection of Taro’s plea by an Israeli district court paves the way for Sun to acquire 12 per cent stake of the Israeli company’s chairman Barrie Levitt and his family members at $7.75 a share. The tender offer ends on September 3.

Sun Pharma's Hungarian subsidiary, Alkaloida Chemical Company Exclusive group (Alkaloida), last month offered to acquire shares of Taro, including that of the promoters, as part of an ‘option agreement’ which was signed between Sun and Taro during the merger talks nearly two years ago. That agreement gives Sun Pharma an option to acquire the promoters’ stake, in the event of a failed merger.

 

Taro in response to the open offer approached an Israeli court demanding a special tender offer under the country’s law that provides protection to minority shareholders. Currently, Sun Pharma is the largest shareholder in Taro, with a 36 per cent stake.

“It is clear, based on yesterday’s ruling, that the lawsuit by Taro’s independent directors was part of a calculated effort by Barrie Levitt to avoid his obligations under the Option Agreement. It is time for Levitt and his family to live up to the contract and do what is required of them under the option agreement,” said Dilip Shanghvi, chairman and managing director of Sun Pharma.

A Sun Pharma statement said Judge Michal Agmon-Gonen of the Tel-Aviv District Court has ruled that it was “disingenuous” for Taro's directors to seek a special offer, more than a year later they have approved the transaction. The directors should have “studied the agreements” prior to signing the documents and should have confirmed then that they were in the company's best interest. The court stated that the directors cannot claim now that they suddenly decided a special tender offer is necessary, the statement added.

Taro can challenge the District Court's decision in the Israeli Supreme Court, said sources.

Sun Pharma also said it will file an amendment to its previously announced tender offer conditions with the US Securities and Exchange Commission on surrendering of shares of the promoters of Taro, which was a pre-condition earlier. The amendment is to make it mandatory as a follow-on condition after the expiry of the offer, said a Sun Pharma spokesperson.

Sun also said 3,627 ordinary shares had been tendered and not withdrawn from the tender offer as on August 26.

Two weeks ago, the US Federal Trade Commission (FTC) had given a go-ahead signal to Sun to acquire Taro Pharmaceuticals, after the regulator forced the Mumbai based company to sell off three of its drugs to Torrent Pharmaceutical, to avoid a monopolistic situation in the US market.

The news, however, failed to enthuse the investors of Sun Pharma, as its stocks fell by Rs 8 on the BSE today to close at Rs 1481.65 from yestersay’s Rs1489.55.