Mumbai: A Tel Aviv judge has questioned the grounds on which Taro Pharmaceutical Ltd challenged an open offer by Sun Pharmaceutical Industries Ltd, India’s largest drug maker by market value, to the Israeli company’s shareholders, an Israeli newspaper reported Wednesday.
Judge Michal Agmon-Gonen of the Tel Aviv district court also commented on Tuesday that agreements “must be upheld,” the ‘Calcalist’ newspaper reported.
Right offer: Chairman of Sun Pharmaceutical Dilip Shanghvi.
Sun Pharma, which currently holds around 36% of Taro, had on 30 June commenced the open offer for Taro shares in the US following the Israeli company’s decision to terminate a merger agreement that it had signed with the Indian firm a year ago.
The Tel Aviv court is considering the merits of a suit filed by Taro against a subsidiary of Sun Pharma and its affiliates on the relevance of the open offer under the Israeli company law. The Israeli firm has challenged the “economic rationale” of the offer.
Judge Agmon-Gonen commented on the first day of the hearing that “the economic rationale of the special tender offer, as it is being demanded by the controlling shareholders” could not be questioned because the Haifa-based company had given the Indian firm the option of making an open offer, according to the report.
“In our freshman year at law school we learned that agreements must be upheld. It is evident from the originating motion that there is a group at Taro, the controlling shareholders, that is not interested in doing so,” the judge was quoted as saying.
Taro has asked the court to obligate the Indian company to submit a special tender offer if it wishes to purchase the shares of the Israeli companies’ founders, the Levitt and Morros families.
The two families hold around 40% of the voting rights in Taro.
At the time of the merger deal, Taro’s key stakeholders and promoters had given Sun Pharma the option of purchasing the founding shares from Taro chairman Barrie Levitt and deputy chairman Daniel Morrow at a price of $7.75 (Rs334.8) per share.