Taro calls Sun offer a 'sham,' asks shareholders not to tender their shares

By Lisa Kerner

Charlotte, N.C., July 10 - Taro Pharmaceutical Industries Ltd.'s board of directors unanimously concluded that Sun Pharmaceutical Industries Ltd.'s offer for the company is financially inadequate.

The $7.75-per-share offer was called a "sham" in a Taro news release.

Taro urged its shareholders not to tender their shares in Sun's "low-ball" offer, which began in June and ends at midnight ET on July 28, it was previously reported.

According to Taro, Sun knows Taro shareholders will not accept the offer, which is far below the current market price of Taro's shares. The price is also below what Sun paid to acquire other blocks of Taro shares in recent privately negotiated transactions, Taro noted.

According to Taro's counsel, the offer is also in violation of the Israeli Companies Law - 1999.

Taro, in a July 10 letter to its shareholders, also called the Sun offer unfair, unilateral and coercive.

Shareholder Templeton Asset Management Ltd. also rejected Sun's tender offer for Taro, believing the offer, made 12 months ago, undervalues the company, executive chairman Mark Mobius said in a statement released Thursday.

Mobius cited Taro's product pipeline, reported operational turnaround and earnings improvement, as well as the opinions of two proxy advisory firms.

"We strongly support the Taro board's plan to re-list Taro shares on Nasdaq and to release the fully audited financial reports for the past years to finally grant all shareholders their right of reviewing the company's results," added Mobius.

"Only then can we have the information necessary to make a decision and obtain a fair price for our shares," Mobius said.

Templeton Asset Management is a wholly owned subsidiary of Franklin Resources, Inc., a global investment management organization operating as Franklin Templeton Investments.

It was previously reported that Taro agreed in May 2007 to be acquired by Sun for $7.75 per share in cash in a deal valued at $454 million including the refinancing of about $224 million in net debt. Taro then terminated the deal on May 28.

Taro's controlling shareholders led by company chairman Barrie Levitt granted Sun an option to acquire all their shares, including the founders' shares, if the merger was not consummated, according to a prior news release.

Sun filed an action in the Supreme Court of the State of New York against Taro and its full board of directors alleging fraud, a prior Sun statement noted. The company said it wants the court to order the controlling shareholders to honor their promises under the option agreement and to declare that the merger agreement between the companies was not properly terminated.

Taro filed suit in Israel to keep Sun from preventing a sale of Taro's Irish operations, it was noted previously.

In addition, Taro filed an action in Israel in May seeking a declaratory ruling that should Sun attempt to purchase Taro shares in an amount that would increase its voting power to more than 45%, it must comply with the special tender offer rules under Israeli law that protect minority shareholders.

Sun said previously that Taro is not entitled to terminate its merger with Sun. However, Taro maintained that either party could terminate the agreement after Dec. 31.

Taro is a pharmaceutical company with offices in Israel and Hawthorne, N.Y.

Mumbai, India-based Sun makes specialty pharmaceuticals and active pharmaceutical ingredients.

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