MUMBAI - Sun Pharmaceutical has emerged victorious in the protracted battle with Taro Pharmaceutical in its bid to acquire control of the Israel headquartered company. A Tel Aviv District Court rejected Taro's contention for a special tender offer under Israeli law before Sun Pharma could proceed with its objective to gain control of Taro management.

Sun Pharma claimed victory in all elements of its defense of the litigation brought against it by Taro and certain directors on its board. As a result, Sun Pharma will now be in a position to complete its previously announced "tender offer" by its subsidiary Alkaloida Chemical Company. Sun had announced its tender offer to hike its ordinary shareholding from the current 36 percent to 48 percent at a price of $7.75 per share.

Once Sun musters 48 percent ordinary shares in Taro, it will result into 65 percent controlling shares in Taro Pharma, according to a merger agreement reached between the two companies more than a year ago (Also see "Sun Pharma Extends Offer For Taro Shares In Ongoing Rocky Affair" - Scrip, 16 July, 2008.).

"Following the closing of the Tender Offer, all conditions to Sun Pharma's option agreement to acquire all the shares held by the controlling shareholders of Taro will be satisfied and the controlling shareholders will have to deliver their shares," Sun Pharma said in a statement claiming complete victory in the case.

According to Sun Pharma, Tel Aviv District Court Judge Michal Agmon-Gonen ruled that it was "disingenuous" for Taro's directors to claim now, more than 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, Sun Pharma added.

"It is clear based on yesterday's 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 Dr. Levitt and his family to live up to the contract and do what is required of them under the option agreement," Sun Pharma Chairman Dilip Shanghvi said.

Referring to Taro directors who also own shares in the company, Sun Pharma reproduced the court's statement which said that "these shareholders benefited from Sun's investment, which basically saved Taro from collapse," and characterized their conduct in challenging Sun Pharma's exercise of its contractual option as "grave." The court also ordered Taro and other plaintiffs to pay Sun Pharma's costs related to the litigation.

Industry experts told PharmAsia News that Taro's argument was seen as weak from the beginning and the Tel Aviv judge indicated her reservation on Taro's breech of contract with Sun Pharma. "Action may now move to Supreme Court of Israel as Taro may go for an appeal," an industry source added on conditions of anonymity.

Sun is also battling Taro in U.S. court. On June 26, Sun Pharma filed an action in the Supreme Court of the State of New York against Taro and its board of directors. The action asserted fraud claims against Taro, and Sun Pharma's directors pleaded to order the controlling shareholders to honor their promises under the option agreement (Also see "War Of Words Back Between Taro, Sun Pharma; Both Vow to Wrest Taro Control" - Scrip, 29 July, 2008.). In addition, Sun asked for an order declaring that the merger agreement was not properly terminated. That case is separately handled and will continue to take its own course, a Sun Pharma spokesperson told PharmAsia News.

- Vikas Dandekar (v.dandekar@elsevier.com)

Advantage Sun Pharma As Tel Aviv Court Rules Out Special Tender Offer For Taro Shares

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