The Hindu Business Line : Reject Sun’s offer, Taro tells shareholders

Slug-fest
Sun Pharma decides to push on with hostile bid
Taro says it is trying to gain control without paying a fair price.
Sun Pharma at present holds about 36% in Taro.

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Mumbai, July 10 Less than a fortnight after Sun Pharma pushed ahead with its open offer to acquire outstanding ordinary shares of Taro Pharmaceutical Industries Ltd, the Israeli drug-maker’s board has asked its shareholders to reject Sun’s offer.

Taro Pharmaceutical has unanimously concluded that Sun’s offer is financially inadequate and is a “sham” offer, the company said in its letter to shareholders. Sun’s tender offer price, at $7.75 per share, is below current market price of Taro’s shares and the price Sun paid to acquire other blocks of company’s shares in privately negotiated transactions, Taro said, referring to the $10.25 per share offer at which Sun bought the stake of Brandes Investment Partners, one of the unhappy minority stake holders.

“In order to gain control of Taro without paying a fair price to the shareholders, Sun is now making a “low-ball” offer that we believe it knows will not succeed, solely for the purpose of exercising certain options pursuant to an option agreement the Levitt and Moros families entered into with Sun at the time the merger agreement was signed over a year ago,” the note said.

Further, citing the advice of its legal counsel, Taro said that Sun’s offer violated the Israeli Companies Law, 1999.

Disagreement

Sun Pharma has decided to push through with a hostile bid and acquire the equity of controlling shareholders in Taro, after the latter had unilaterally terminated Sun’s $454-million proposal in May this year. The termination came precisely a year after the agreement had been forged between the two companies. Sun, though, had stuck to its guns, stating that Taro was not entitled to terminate the agreement. The two companies continued their public slug-fest, with Taro’s intention to sell its Irish facility being the latest flash-point.

Hauled to Court

Sun Pharma’s tender offer closes later this month, unless extended. And this comes even as Sun Pharma filed a suit against Taro’s board of directors at the Supreme Court of New York for fraud, urging the court to order Taro that the terms of the Option Agreement be followed.

On stake

Sun Pharma at present holds about 36 per cent in Taro, and by exercising its option to acquire the controlling shareholders’ shares, it would get 12 per cent of the economic share, taking its share up to 48 per cent. Sun Pharma’s voting shares would go up to 65 per cent.

Sun Pharma’s shares were marginally down, at Rs 1,321.70, on the BSE.