Israeli Court Tells Taro Owners To Sell Out
IN A victorious move for Sun Pharma, the Israeli district court, in a ruling on Tuesday, ordered the promoters of Taro to sell their stake in the company for $7.75 per share. The Tel Aviv Court also rejected Taro’s contention that Sun Pharma should have conducted a special tender offer under Israeli law. Sun Pharma is now in a position to complete the tender offer following which all conditions for the option agreement to acquire the shares held by the controlling shareholders of Taro will be satisfied and the controlling shareholders will have to deliver their shares.
Judge Michal Agmon-Gonen J of the Tel-Aviv district court ruled that it was disingenuous for Taro’s directors to claim now, over a year after they approved the transaction, that a special tender offer was required. The court stated that the directors should have studied the agreements prior to their being signed, 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.
In a statement issued by the company, Sun Pharma chairman and managing director Dilip Shanghvi said: “It is clear, based on the ruling, that the lawsuit by Taro’s independent directors was part of a calculated effort by (Taro chairman) Barry Levitt to avoid living up to his obligations under the option agreement. It is time for Mr Levitt and his family to live up to the contract and do what is required of them under the option agreement.”
After the deal goes through, Sun Pharma will raise its stake from 36% to 48% while its voting rights will increase to over 60%. Option to appeal open
TARO founders and Templeton Asset Management have the option to appeal against this decision in the Supreme Court in Israel. Whether they decide to exercise that option is not clear. An official query to Mark Mobius, head of Templeton Asset Management, however, received no reply
The two companies (Taro and Sun Pharma) have been at loggerheads since May this year, after Taro cancelled the merger agreement signed between then a year ago.
Taro’s main bone of contention was that the price offered for Taro’s shares was ‘too low’. Taro had filed a case in the Israeli court to prevent Sun from taking it over at such an under-valued price. In retaliation, Sun filed a case in the Supreme Court of New York against Taro for breaking their agreement. It also commenced a tender offer for all outstanding shares of Taro which expires on September 2.
Earlier, international reports quoted Taro chairman Mr Levitt stating that there are a number of companies that are willing to buy Sun’s share in Taro for $10.25 a share and even more. “Sun has to be willing to sell.” he said. This question, however, does not arise now as Sun will have a majority stake in Taro. The court also stated that the directors, who are also shareholders, benefited from Sun’s investment, which saved Taro from collapse.
Sun has announced that its tender offer will now close a day later on September 3. Sun Pharma’s stock closed at Rs 1,481.65, down 0.53% from its previous day close.
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