Advantage sun

Sun pharma’s hostile bid to take over Israeli drug major Taro Pharma received a fillip last fortnight. An Israeli court ruled in favour of Sun and against the motion of Taro to conduct a special tender offer. Taro’s directors had filed a suit in June this year, requesting a Tel Aviv court to force Sun to comply with special tender offer rules. Such regulation is meant to protect minority shareholders’ interests under Israeli law.

“Basically, this case is a big win for Sun. It proves that we have done everything that was to be done and Taro was not doing what was in the best interest of its shareholders,” says a Sun Pharma spokesperson commenting on the ruling.

It may be recalled Sun and Taro had signed a merger agreement last May, which Taro withdrew from almost a year later. Since then, the two companies have been crossing swords in courts in Israel and the US. Taro had pulled out of the merger agreement citing that Sun’s offer price was too low considering Taro’s improved financial performance in calendar year 2007.

Sun had contested the claim saying that the performance would not have been possible but for Sun’s cash injections into Taro. Sun also held the Taro board could not unilaterally terminate the agreement as per their original agreement and that its proposed revised offer of $10.25 per share was a fair price.

Market watchers believe the latest judgment is a positive for Sun, although it might be too early to start dancing in the aisles. “It’s definitely a positive move for Sun Pharma but to say that Sun is closer to acquiring Taro is a bit too early. Taro can still appeal with the Supreme Court of Israel,” says Sarabjit Kour Nangra, VP, Research at Mumbaibased Angel Broking. “However, the verdict might help as a base for any further litigation,” she adds. But that’s just one front that Dilip Shanghvi, founder of Sun Pharma, is fighting Taro on. As a Morgan Stanley research report says: “Separately, Sun continues to litigate with Taro promoters in New York courts, primarily on two counts.

One, the enforcement of the option agreement; and two, a challenge to Taro’s purported termination of the merger agreement. The elimination of the special tender offer holds the key to the Taro acquisition, and now Taro promoters have limited defense options left, we believe.” Clearly, it’s advantage Sun.

—T.V. Mahalingam