"Any potential buyer (of Taro Ireland) would also be entering into such a transaction at its own risk, and Sun reserves all its rights against Taro, its directors, and any potential buyer," states Sun Pharmaceutical Ltd. (BSE: 524715) chairman and CEO Dilip Shanghvi in a letter to Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF) chairman Dr. Barrie Levitt. Shanghvi adds that Taro has no right to sell Taro Ireland without Sun's consent, despite what he calls the "improper termination of the merger agreement."
The letter was in response to Levitt's letter of June 19 to Taro shareholders, his letter of June 15 to Sun Pharma and the initiating motion filed by Taro in the Tel- Aviv District Court on the same day.
Shanghvi noted, "It is telling that, in each of these documents, Taro has been unable to address our substantive objections to the proposed sale of Taro’s Irish subsidiary. Instead, you have tried to deflect attention from the logic of our reasoning by accusing us of breaching our duty of good faith to Taro and its other shareholders. We find this laughable. We made public our grave concerns about the proposed sale, not because we were trying to improperly interfere with Taro’s business, as your lawsuit claims, but because, as a shareholder and potential owner of Taro - whose efforts to consummate the transaction we signed in 2007 you have blocked at every turn - we have no alternative means of alerting other shareholders to the unseemly circumstances of the proposed sale.
"We have no intention of interfering with Taro’s business. Indeed, this would be contrary to our own interests. We do, however, seek full disclosure of the facts relating to the proposed sale of Taro Ireland, as well as management’s justifications for what would appear to a rational onlooker to be a disposition of a valuable asset at an inopportune time, and on terms highly unfavorable to Taro."
Shanghvi states, "Our primary objection lies in what we believe to be the Taro board’s mishandling of Taro Ireland. Your simplistic statements that Taro Ireland has been costing $800,000 per month to maintain, and that its sale will enhance Taro’s cash flows, are yet another example of an ill-considered approach by the same management that led Taro to the brink of insolvency in 2006-7, requiring Sun to invest nearly $60 million to rescue the company. Selling the asset now may increase Taro’s short-term cash flow and improve the company’s performance this year. However, such sale would mean failing to realize a potentially substantial return on the investment of almost $50 million which Taro has made in Taro Ireland over the years."
Shanghvi concluded, "We have set out the facts as they appear to us, and are confident that when other shareholders are provided with full disclosure, they will agree entirely with us as to the long-term potential of Taro Ireland and support our objections to the proposed sale. If you feel that we have gotten the wrong impression, we are sure that you will not hesitate to provide Taro’s shareholders with full disclosure as to: the total investment made in Taro Ireland to date, including capitalized losses; the present asset base of Taro Ireland; Taro Ireland’s financials for the last five years (including sales, expenditure and profits); and Taro Ireland’s products which have been, or are in the process of being, approved by the Irish and other authorities."
Shanghvi charges, "The only rational reason we can imagine for a sale so economically and strategically unfavorable to Taro and its shareholders is that it forms part of your concerted effort to discourage Sun from exercising its right to acquire Taro. This is yet another example of your flagrant breach of fiduciary duty and continued entrenchment by the Levitt family."
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2008
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