"If the court does not accept our position and does not cancel the merger between Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF.PK) and Sun Pharmaceutical Industries Ltd. (NSE: SUNPHARMA, BSE: 524715) it will be very dangerous and will make us wary of making future investments in Israel," said president of the Templeton Emerging Markets Fund Dr. Mark Mobius.
"We have many investments in Israel," said Mobius in a special interview with "Globes." "If the court rules against us in this case, we will lose faith in investments in Israel and in the Israeli justice system as a body which is supposed to protect investors. In such case we certainly might sell off our holdings in Israeli companies, because there is no one to protect us."
"Globes": But what is the connection? Assuming Taro was operating improperly, it is still just one company. Why sell the rest of the shares in companies with excellent reputations such as those which you hold?
Mobius: "Taro was also well known, look what happened there. It scares us. If this is the case, and the court does not change circumstances, who wants to invest in Israel anyway?"
Templeton is traded under the name Franklin Resources on the New York Stock Exchange (NYSE) with a market cap of $33 billion. The fund owns 9% of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), 15.3% of Check Point Software Technologies Ltd. (Nasdaq: CHKP) as well as indirect holdings in Bank Hapoalim (LSE: BKHD; TASE: POLI), Israel Discount Bank (TASE: DSCT), Orbotech Ltd. (Nasdaq: ORBK) and 9.5% of Taro, down from 18% for reasons which Mobius declines to specify.
Dr. Mobius is an emerging markets aficionado. He joined Templeton 20 years ago and founded the emerging markets fund which currently has 13 world-wide offices.
The deal in dispute is the sale of the company to Indian drug company Sun Pharmaceuticals for $7.75 per share, a total of $230 million in cash, plus the payment of $224 million in debts.
This deal has another part to it which has already taken place, prior to the approval by the shareholders' meeting: the injection of $40.7 million in interim financing from Sun at $6 a share, and a similar option for a period of three years. It is this part of the deal that has infuriated Taro's large institutional shareholder, Templeton.
Templeton claims that there were flaws in the approval of the deal and it is therefore null and void, and that the terms of the deal itself constitute discrimination against minority shareholders. Taro, on the other hand, claims that it had no choice, and that without the move, the company would have entered liquidation proceedings.
"Globes": So what do you suggest?
Mobius: "It is unacceptable that someone would want to buy us out at such low prices, therefore we ourselves are willing to acquire Taro at Sun's prices. We are ready to give money now, at $6 per share."
"Globes": But the deal is at $7.75, $6 per share is just the for the initial cash injection. What is Taro's real value in your opinion?
Mobius: "We need information. They aren't disclosing everything to the public."
One of the theories put forth by Taro is that Templeton, which invested at $11.5 per share, simply lost money, and that is why they are chasing after Taro to get it back. At this point Mobius nearly loses it: " That is just baloney. It’s a pile of crock. We make investments all over the world, sometimes you gain, sometimes you lose.
Published by Globes [online], Israel business news - www.globes.co.il - on June 19, 2007
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