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US Court Rejects Taro's Appeal Against Sun Pharma In Takeover Battle

16 July, 2010

The never-ending battle between Sun Pharma and Israeli pharma firm, Taro Pharmaceutical Industries Ltd, seems to be nearing an end as the US Court dismissed the complaint filed by Taro seeking to block the tender offer by Sun’s subsidiary, Alkaloida, to purchase all outstanding Ordinary Shares of Taro. Sun Pharma, the largest shareholder in the Israeli firm, holds around 36% stake. The companies are locked in a legal battle for the last three years.

The United States District Court for the Southern District of New York rejected Taro’s claims based on allegations that Sun and Alkaloida Chemical Company Exclusive Group Ltd had failed to make adequate disclosures concerning the offer.  The court also rejected Taro’s request for discovery, remarking that Taro had not explained any purpose that discovery would serve.

Sun Pharma had signed a $454 million merger agreement with Taro in 2007 including equity purchase of approximately $230 million at $7.75 per share in cash. However in 2008, Taro unilaterally terminated the agreement citing lower valuations. In 2008, Sun Pharma had launched an open offer to acquire additional stake in Taro, which was challenged by Taro. Following which both companies filed suits in Israeli and the US courts.

Last month, Sun Pharma had rejected a proposal from US investor firm Guggenheim to acquire Sun’s stake in Taro. The New York-based Guggenheim Partners is a privately held diversified financial services firm, hired by Taro to advise on matters related to the battle with Sun Pharma.

The US court also dismissed Taro’s other claims, including breach of contract and misappropriation of trade secrets, for lack of subject matter jurisdiction. The court gave Taro two weeks to file an amended complaint to attempt to fix the defects in its complaint. However, even if Taro revives its state law claims, they will not entitle Taro to obtain the injunction it was seeking to enjoin consummation of Alkaloida’s offer, said a Sun Pharma statement.

Dilip Shanghvi, chairman and managing director of Sun Pharma, “Sun is pleased, but not surprised, by this decision.  The US District Court’s complete dismissal of Taro’s complaint confirms that this most recent lawsuit was just one more unfortunate attempt by the Taro directors to divert Taro’s limited resources to assisting the Levitt family in their ongoing refusal to comply with their contractual obligations.  Taro’s previous attempt to thwart Sun’s contractual rights already resulted in a stunning denunciation of the Taro directors by the Tel-Aviv District Court.  Sun hopes that the Taro directors will not waste additional time or company resources on any further such tactics.”

In January, Tel Aviv district court had ruled in Taro’s favour dismissing the declarative remedies sought by Sun Pharma concerning Taro’s failure to publish audited financial reports. Taro has not published audited financial reports since 2003. On Taro’s AGM held on December 31, 2009, the majority of shareholders voted to re-elect all the directors who were up for election, except for statutory external directors.

According to the Sun Pharma statement, Alkaloida’s offer remains subject to a continuing order issued by the Supreme Court of Israel temporarily prohibiting the closing of the offer until the Supreme Court issues a decision on the appeal of the separate litigation commenced against Alkaloida and its affiliates by Taro and certain of its directors regarding the applicability of the special tender offer (STO) rules under the Israeli Companies Law to the Offer. 


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US Court Rejects Taro's Appeal Against Sun Pharma In Takeover Battle

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