ROCKY HILL, N.J., Feb. 27, 2012 /PRNewswire/ -- Raging Capital Management, LLC ("Raging Capital"), one of the largest unaffiliated shareholders of Taro Pharmaceutical Industries Ltd. ("Taro") (Pink Sheets: TAROF), announced today that it delivered a letter to the Board of Directors of Taro demanding that it immediately reject the October 18, 2011 proposal of Sun Pharmaceutical Industries Ltd. to acquire all of the remaining outstanding shares of Taro at a price of $24.50 per share. Raging Capital stated that it will hold each Taro director personally accountable and liable to the extent the Board accepts any acquisition proposal that undervalues the company.
The full text of the letter follows:
February 27, 2012Taro Pharmaceutical Industries Ltd.
14 Hakitor Street
Haifa Bay 26110, Israel
Board of Directors:
Dear Members of the Board:
Raging Capital Management, LLC is one of the largest unaffiliated shareholders of Taro Pharmaceutical Industries Ltd. ("Taro" or the "Company"). In a letter to the Board of Directors dated November 3, 2011, we expressed to you our serious concerns regarding the grossly inadequate proposal of Sun Pharmaceutical Industries Ltd. ("Sun Pharma") to acquire all of the issued and outstanding shares of Taro at a price of $24.50 per share, in cash (the "Acquisition Proposal"). We are disappointed that you have still not responded to this letter. Since then, we have read with great interest various public letters from other significant shareholders expressing their own concerns that Taro is positioning itself for a sale to Sun Pharma in a transaction that would fleece the minority Taro shareholders while lining the pockets of Sun Pharma shareholders, employees and affiliates, including Chairman Dilip Shanghvi as well as Sudhir Valia, Aalok Shanghvi and James Kedrowski.
On January 12, 2012, Taro announced that the Special Committee is still evaluating the Acquisition Proposal, that it continues to "work diligently" with its financial and legal advisors to evaluate the offer and that it is "committed to protecting" the interests of minority shareholders. We find these assertions to be disingenuous and mere window-dressing by a Board whose actions suggest that it is focused on advancing Sun Pharma's interests at the expense of minority shareholders.
As noted by IzSo Capital in its letter to the Board dated December 13, 2011, in connection with its recent annual general meeting of shareholders, Taro recommended that the shareholders approve various insurance, indemnification and exemption protections for the benefit of its officers and directors, including for liability they may face relating to going private transactions like the one proposed by Sun Pharma. The timing of the Board's efforts to secure these self-serving protections casts serious doubt that it is fully and fairly evaluating the Acquisition Proposal and that it is committed to protecting the interests of minority shareholders. Rather, these actions raise serious questions regarding the Board's true agenda which we quote from IzSo Capital's letter: "why do the members of the Board of Directors require such protections if they intend to exercise their fiduciary duties and reject Sun's grossly inadequate offer? Does this mean that Taro's Board has already decided to approve Sun's proposal and is bracing itself for future litigation? If the answer is yes, what is the purpose of the Special Committee?"
It is shocking that the Board refuses to publicly acknowledge the inadequacy of Sun Pharma's $24.50 offer, even with the benefit of being advised by Citigroup Global Markets. If you revisit the relative valuations of Taro and Sun Pharma presented in our November 3, 2011 letter, it is clear that the Acquisition Proposal continues to grossly undervalue Taro. Based on Sun Pharma's closing share price on February 24, 2012 and its recently reported results which have now fully consolidated Taro for a full twelve months, Sun Pharma's enterprise value is now $11.3 billion, or 19.2x trailing twelve-month earnings before interest, taxes, depreciation and amortization (EBITDA). Based on the annualized run-rate of the last two quarters of results that were announced subsequent to receipt of the Acquisition Proposal, Taro accounted for a substantial 40.4% of Sun Pharma's EBITDA. In contrast, Sun Pharma's offer of $24.50 per share values Taro at 7.9% of Sun Pharma's enterprise value and values the Taro business at only 3.1x run-rate EBITDA. The relative EBITDA contribution from Taro indicates that full value would have to be $106.91 per Taro share in order to equal 40.4% of Sun Pharma's enterprise value. Why does the Board continue to even entertain Sun Pharma's $24.50 offer?
We will not allow our shares to be sold at such an extreme discount to the true value of the Company. We call upon the Special Committee to immediately reject the Acquisition Proposal. You are each reminded of your individual fiduciary duty to protect the interests of all shareholders, including the interests of the minority shareholders. We assure you that merely going through the motions of forming a Special Committee and hiring an investment banking firm, and even expanding the Company's indemnification provisions, will not insulate you from the substantial liability that will arise from the acceptance of an Acquisition Proposal that undervalues the Company. If necessary, we will hold each of you personally accountable and liable to the fullest of our abilities.
Raging Capital Management, LLC
By:/s/ William C. Martin
Name: William C. Martin
Title: Managing Member
|SOURCE Raging Capital Management, LLC|
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