The Tel Aviv District Court yesterday held a hearing on the option Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF) chairman and controlling shareholder Dr. Barrie Levitt awarded Sun Pharmaceuticals Ltd. (BSE: 524715) on Taro's founders shares. The option was included in the merger agreement signed last year, which Taro unilaterally abrogated a month ago.
"We learned in first year law school that contracts must be honored," noted Judge Michal Agmon-Gonen at the start of the hearing. "Taro's request suggests that its controlling shareholders are not really interested in honoring agreements," she added. Judge Agmon-Gonen oversaw the previous Taro court case arising from the merger, when Taro and Sun were on the same side against minority Taro shareholders who opposed the deal.
With the consent of Sun's lawyers, Judge Agmon-Gonen agreed to extend the period of Sun's offer to purchase Taro shares until September 2. The parties will have to file their statements of response in the coming weeks. In late August, the judge will decide on Taro's motion to change Sun's offer to purchase into a special offer to purchase, which would require at least half of Taro's shareholders to agree to sell their holdings at the offer price.
During the hearing, Sun's Israeli attorney, Adv. Israel Leshem, said, "Sun's lawyers in New York said that if the court makes a recommendation to the parties, we can extend the offer to purchase until the end of August."
The 2007 merger agreement set a price tag of $7.75 per Taro share, and included an option allowing Sun to buy the company's founders shares from the Levitt and Moros families at the same price in the event that the merger failed. At the time, Sun promised to make an ordinary offer to purchase in order to avoid charges of discrimination against Taro's minority shareholders.
In an effort to block Sun from exercising the option, Taro's independent directors initiated legal action to force Sun to make a special offer to purchase before it could acquire Taro's founders' shares.
Sun has proposed that Taro shares in excess of 44.9% of the company be transferred to a blind trust until the courts rule on the case. Sun has contacted Ubank Ltd. to act as trustee, if this alternative is accepted. Sun believes that, if the court rules that it must make a special offer to purchase, a blind trust will enable the company to choose whether to make a revised offer to purchase or instruct the trustee to sell the Taro shares.
Judge Agmon-Gonen said, "I like this proposal. First, the controlling shareholders will honor their commitments, and then we can discuss the other questions."
The proposal was torpedoed by Taro's lawyers.
Taro closed at $9.45 on the Pink Sheets yesterday.
Published by Globes [online], Israel business news - www.globes-online.com - on July 15, 2008
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