Sun gets favourable ruling in battle for Taro

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Late in the day

The Tel-Aviv District Court told Taro's directors that it was "disingenuous" to claim now, over a year after they approved the transaction, that a special tender offer was required.

Our Bureau

Mumbai, Aug. 27 Sun Pharma's $454-million proposal to acquire Israeli-drug company Taro Pharmaceutical received a shot in the arm, with the Tel-Aviv District Court rejecting Taro's contention that Sun should conduct a 'special tender offer' under the Israeli law.

Consequently, Sun Pharma will be able to complete its previously announced tender offer by its subsidiary, Alkaloida Chemical Company Exclusive Group Ltd, a Sun Pharma communiqué said. However, the course is only partially clear, as Taro could appeal the ruling, following which the case could then shift to Israel's Supreme Court, a company official familiar with the development told Business Line.

Taro had terminated Sun's acquisition proposal, a year after it had been formalised. The Tel-Aviv District Court told Taro's directors that it was "disingenuous" to claim now, over a year after they approved the transaction, that a special tender offer was required, a Sun Pharma note said.

The court said that Taro's directors should have studied the agreements before being signed, and should have confirmed then that they were in the company's best interest. The court further stated that the directors cannot claim now that they suddenly decided a special tender offer is necessary, the note said.

As per the Israeli law, when no existing shareholder in the company has more than 45 per cent, and a new shareholder wants to acquire more than 45 per cent, he needs to go in for a special tender offer, a company official explained. Also, this special tender offer needs to be approved by shareholders.

Sun's contention was that it was buying the entire stake from the promoters in a private transaction and at the time of the deal, the promoters held this amount of shares, as a result of which the special tender offer rules did not kick in.

The Israeli district court also ordered Taro and the other plaintiffs to pay Sun Pharma's costs related to the litigation, Sun said.

Meanwhile, there is an ongoing case filed by Sun Pharma with the New York Supreme Court, which has the jurisdiction regarding the option agreement between the two companies. Sun had approached the New York court to get Taro to implement conditions of the option agreement.

Open offer

The closing date for the tender offer (that opened on June 30) has been extended by a day to September 3. Once closed, all conditions regarding Sun Pharma's Option Agreement to acquire all the shares held by the controlling shareholders of Taro will be satisfied and controlling shareholders will have to deliver their shares, Sun said. Sun holds about 36 per cent in Taro and its offer for Taro's outstanding shares is at $7.75 a share.

In connection with the court's decision, Sun said that it has filed an amendment to its previously announced tender offer by Alkaloida that provides for the waiver of certain conditions to the offer, including the condition that the controlling shareholders of Taro have to first give in their equity before the open offer, as per the Option Agreement with Sun Pharma, a company official said. Till yesterday, 3,627 ordinary shares had been tendered and not withdrawn from the tender offer, Sun said in a separate note.

Sun Pharma's Rs 5 shares closed almost flat on the NSE on Wednesday at Rs 1,483.

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