MUMBAI, India, May 29 /PRNewswire/ -- Sun Pharmaceutical Industries Ltd. (Reuters: SUN.BO, Bloomberg: SUNP IN, NSE: SUNPHARMA, BSE: 524715) today sent a letter to Barrie Levitt, M.D., Chairman of Taro Pharmaceutical Industries Ltd. (Taro, Pink Sheets: TAROF) regarding Taro's purported termination of the May 18, 2007 merger agreement with Sun.
Dilip Shanghvi, Chairman and Managing Director of Sun, said, "Taro is not entitled to terminate the merger as per our agreement. We remain skeptical of Taro's turnaround. Taro has only $47 million in cash as of March 31, 2008. This means that, if not for Sun's cash injections of approximately $60 million last year, Taro would have virtually negative cash -- hardly the "dramatic" improvement of which Taro has boasted. While Sun has made every effort to fulfill its obligations under the Merger Agreement, Taro has failed to honor its side of the bargain and take all necessary action to consummate the merger. Further, Taro has ignored our attempts to discuss, and put forward to Taro's shareholders, an increase in the merger consideration in order to complete the transaction."
While Mr. Shanghvi notes that in light of Taro's actions, Sun will now consider all of its options, he said, "We continue to believe that a merger with Sun at $10.25 per share that we have offered to recommend to Sun's board is in the best interests of all Taro shareholders."
The full text of Sun Pharma's letter to Barrie Levitt, M.D., appears
17/B, Mahal Industrial Estate,
Mahakali Caves Road,
Andheri (East), Mumbai 400 093 India
Tel.: (91-22) 6645 5645
Fax.: (91-22) 6645 5685
May 29, 2008
Barrie Levitt, M.D.
Chairman of the Board of Directors
Taro Pharmaceutical Industries Ltd.
14 Hakitor Street
Haifa Bay 26110, Israel
Taro Pharmaceutical Industries Ltd.
Italy House, Euro Park
Yakum 60972, Israel
I received your letter dated May 28, 2008, as well as the letter of the same date from Taro Pharmaceutical Industries Ltd. ("Taro") notifying our affiliates, Alkaloida Chemical Company Exclusive Group Ltd. and Aditya Acquisition Company Ltd., that Taro has purported to terminate the Agreement of Merger, dated as of May 18, 2007 (the "Merger Agreement"), among Taro, Alkaloida Chemical Company Exclusive Group Ltd. and Aditya Acquisition Company Ltd. pursuant to Section 8.1(b) thereof.
First of all let me state that Taro is not entitled to terminate the merger under the Merger Agreement. I am very disappointed that you have chosen to take this public step without engaging in any meaningful discussions with Sun Pharmaceutical Industries Ltd. and/or its associates ("Sun"). During my meeting with Taro's Board on May 14th, arranged specifically to discuss the merger, you prevented the directors from engaging in any meaningful discussion with me, asking them to remain in "listen-only" mode during the course of the meeting.
Without Sun's equity contributions totaling approximately $60 million, Taro would be unable to boast of survival, much less a purported financial and operational "turnaround." Without our investment, Taro would not have been able to meet the bond payment due within days of our first investment. Further, the only reason Taro has been able to keep its lenders at bay is with Sun's contractual commitments to repay all disclosed indebtedness as part of the merger transactions. In fact, Taro continues to generate very little free cash flow. Taro's press release yesterday noted that Taro has only $47 million in cash as of March 31, 2008. This means that, if not for Sun's cash injections last year of about $60 million, Taro would have virtually negative cash -- hardly the "dramatic" improvement of which Taro has boasted.
Sun invested in Taro, at the request of the Taro Board. The Merger Transaction between Sun and Taro followed a thorough auction process conducted by Taro, was fully negotiated, and Taro's Board of Directors concluded that it represented the best alternative available to Taro and its shareholders. Even after Sun agreed to release Taro from its non-solicitation obligations under the Merger Agreement, not one buyer has stepped forward with a competing offer.
While Sun has made every effort to fulfill its obligations under the
Merger Agreement, Taro has failed to honor its side of the bargain and take
all necessary action to consummate the merger, including, among other
things, to hold shareholders' meetings to approve the merger in a timely
manner. Instead of engaging in discussions with us to resolve this impasse,
Taro has ignored our attempts to discuss and put forward to Taro's
shareholders an increase in the merger consideration in order to complete
the transaction. Instead of providing shareholders with an accurate
description of its dealings with Sun and giving them the opportunity to
vote on the transaction, Taro has chosen to mischaracterize a number of
matters leading up to its unilateral termination of the Merger Agreement,
-- Sun has not made an offer to purchase Taro at $10.25 per share. We
reached out to the Taro Board with a proposal to recommend to Sun's
Board of Directors a potential merger at $10.25 per share. We took
this step in order to engage in a meaningful discussion with the Taro
Board in order to consummate the transaction negotiated and agreed to,
way back in May 2007. Any offer at $10.25 per share was subject to the
approval of Sun's Board.
-- You have chosen to describe our purchase in February this year of Taro
shares at $10.25 per share from Brandes Investment Partners, L.P.
("Brandes") as a "minority interest" purchase. This is completely
contrary to your position at the time. Brandes' shares were sold in a
blind auction. You encouraged Sun to bid aggressively in the auction
on the basis that Brandes' shares represented a "control block" or, in
other words, a "swing vote" in the shareholders' meetings to approve
-- We only recently refused your request to permit our financial advisers
to meet with Taro's financial advisors because it was clear to us that
Taro had no intention of engaging in a meaningful discussion about an
appropriate increase in the merger consideration. I personally
reorganized my schedule at short notice to meet with the Taro Board in
New York on May 14th and, at the meeting, Board members were prohibited
from asking questions or engaging in any discussion.
-- I find surprising the claim in your press release that "Taro's efforts
over several months to negotiate a revised merger agreement ... had
been rejected by Sun". Sun first proposed recommending to its Board an
increase in the merger consideration on the weekend immediately
following its acquisition of the Brandes' stake and thereafter sent you
a draft revised merger agreement. Only after an extended period of
foot dragging, did you finally respond with a request that we increase
our price, but you never made a specific counter-proposal. In fact,
the closest we ever came to engaging in a substantive discussion on
price and the other terms of our proposal was at the Taro Board meeting
on May 14th at which I made a presentation but you prevented the
directors in engaging in any meaningful discussion with me, asking them
to remain in listen only mode during my meeting.
-- Our proposal to increase the merger consideration to $10.25 per share
was not conditioned on removing the one-third disinterested minority
vote requirement under Israeli law. You may recall that your own proxy
statement, which you refer to in your letter to me, specifically states
that Taro only included the one-third disinterested vote requirement
"out of an excess of caution." Based on your disclosure, our advisers
had discussed in the past whether such a vote was actually necessary,
but we had not reached any substantive agreement with you on this
point. As a matter of fact one of your own legal advisors had suggested
that at right price Taro would be prepared to remove it as a condition
to merger. If instead of prohibiting your directors from discussions
with me, you had in fact enquired as to our position on the one-third
disinterested minority vote at the Board meeting on May 14th, you would
have learned that our $10.25 proposal was not conditioned on its
-- Your claim that several third parties have expressed interest in
pursuing alternative transactions with Taro and that the existence of
the Merger Agreement and the lack of audited financial statements have
inhibited discussions with third parties is misleading. Sun agreed to
remove the non-solicitation provision from the Merger Agreement almost
10 months ago. Since that time, to our knowledge, no credible offers
for the entire company have surfaced and we note in this regard that
Taro is required to advise Sun of any and all indications of interest
that Taro receives. We also note that in those 10 months, Taro has
still not produced audited financials for 2006 and 2007 and there is
still no indication from Taro as to when it will do so. Not only does
Taro continue to be in breach of its reporting requirements, but any
"impediment" this may have imposed to obtaining a superior offer is
purely of Taro's own creation. Again, we note that Sun has
consistently been willing to complete the merger without audited
financial statements, a highly unusual concession rarely made by a
buyer in a corporate acquisition.
In light of Taro's actions, Sun will now consider all of its options, including without limitation commencing legal proceedings as to Taro's right to terminate the Merger Agreement. In addition, if we elect to exercise our rights under the Option Letter Agreement, rest assured that we will comply with the terms thereof and all applicable laws. This letter should not be treated as a complete statement of all our claims, rights and positions, all of which are hereby expressly reserved.
As Taro's largest shareholder, we welcome the commitment of the Taro
Board to build Taro and enhance its profitability for all of the company's
constituents. Notwithstanding the options discussed above, we continue to
believe that a merger with Sun at $10.25 per share that we have offered to
recommend to Sun's board is in the best interests of all Taro shareholders.
I remain available to discuss a negotiated transaction with you at any
Very truly yours,
Dilip S. Shanghvi
Chairman & Managing Director
About Sun Pharmaceutical Industries Ltd.
Established in 1983, listed since 1994 and headquartered in India, Sun
Pharmaceutical Industries Ltd. (Reuters: SUN.BO, Bloomberg: SUNP IN, NSE:
SUNPHARMA, BSE: 524715) is an international, integrated, speciality
pharmaceutical company. It manufactures and markets a large basket of
pharmaceutical formulations as branded generics as well as generics in
India, US and several other markets across the world. In India, the company
is a leader in niche therapy areas of psychiatry, neurology, cardiology,
diabetology, gastroenterology, and orthopedics. The company has strong
skills in product development, process chemistry, and manufacturing of
complex API, as well as dosage forms. More information about the company
can be found at http://www.sunpharma.com.
Uday Baldota - Sun Pharma
Tel +91 22 6645 5645, Xtn 605
Tel Direct +91 22 66455605
Mobile +91 98670 10529
E mail firstname.lastname@example.org
Mira Desai - Sun Pharma
Tel +91 22 6645 5645, Xtn 606
Tel Direct +91 22 66455606
Mobile +91 98219 23797
E mail email@example.com
Brunswick Group for Sun Pharma
Nina Devlin/Erin Becker
Tel + 212 333 3810
|SOURCE Sun Pharmaceutical Industries Ltd.|
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