The spat between Sun Pharma and Israeli firm Taro Pharma continues unabated. On Thursday, Taro Pharmaceuticals announced that it has taken legal action against Sun in an effort to prevent it from interfering with the proposed sale of Taro’s manufacturing facility in Tipperary, Ireland. Though the company has taken the legal route, Taro invited Sun to submit an offer to purchase the Irish operations.
Barrie Levitt, chairman, Taro, in a letter to the shareholders said that it has initiated legal action to prevent Sun from “engaging in practices that we deemed detrimental to our ability to maximise the value of the Irish operations in a sale”. Taro’s board continues to believe that the sale of the Irish operation is in the best interest of the company, he added.
Yet, while the merger agreement has been terminated, Sun has continued its opposition to the sale, and has recently threatened to place advertisements in the Irish press opposing it, he added. “To protect the interests of Taro and our shareholders, on June 15, we commenced litigation in Israel to stop Sun from engaging in practices that we deemed detrimental to our ability to maximize the value of the Irish operations in a sale. At the same time, we invited Sun to submit an offer to purchase the Irish operations if it wishes to do so. We will give any proposal submitted by Sun the same serious consideration that all bona fide offers receive,” the letter said.
During June first week, in a letter to Barrie Levitt, Sun’s chairman Dilip Shanghvi, while detailing the reasons why the company refused Taro’s plans to sell off its Irish subsidiary, said that Taro undervalued the Irish operations. Dilip Shanghvi had said, “Given the undervaluation mentioned, and the fact that the identified buyer is personally close to senior Taro officials, we have doubts as to the arm’s length nature of this transaction. This close relationship between Taro’s management and the proposed buyer is especially troubling, given Taro’s repeated refusal to consider Sun as a potential buyer of the Irish facility on the grounds that we were a “related party” and the difficulties that Taro’s management claimed were inherent in such a transaction with a related party.”
Taro said, “In 2007, before the merger agreement with Sun was signed, we reached an agreement in principle to sell our Irish subsidiary to a group of Irish investors. The Irish operations are not part of our core business, and have been costing us approximately $800,000 per month to maintain. Their sale would have substantially enhanced our profitability and cash resources. Nevertheless, Sun, whose consent to the sale was required under the terms of the merger agreement, repeatedly refused to agree to the transaction.”