Templeton shines on Sun’s bid to buy Taro

Templeton shines on Sun’s bid to buy Taro
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First Published: Mon, Jan 04 2010. 11 13 PM IST

Protecting interest: Mark Mobius of Templeton Asset Management. Dimas Ardian / Bloomberg
Protecting interest: Mark Mobius of Templeton Asset Management. Dimas Ardian / Bloomberg
Updated: Mon, Jan 04 2010. 11 13 PM IST
New Delhi: The battle for the control of Israel’s Taro Pharmaceutical Industries Ltd has gathered momentum, despite Indian firm Sun Pharmaceutical Industries Ltd’s failure to dislodge, at last week’s annual general meeting (AGM), the board of the former, which it is trying to acquire.
Templeton Asset Management Ltd, which has a 12% stake in Taro and is a recent convert to the cause of the Indian firm, has said it will protest the outcome of the meeting.
Protecting interest: Mark Mobius of Templeton Asset Management. Dimas Ardian / Bloomberg
Sun and its subsidiaries have an almost 42% stake in Taro.
“I later learnt that we (minority shareholders in Taro) did not defeat the motion to absolve directors and management from responsibility for the financials. This will have to be the subject of further objections,” Mark Mobius, executive chairman of Templeton Asset Management, said in an email.
Mobius declined comment on the link between this protest and the ongoing spat between Sun and Taro over an acquisition agreement.
On 31 December, at Taro’s AGM, 78% of the company’s minority shareholders—minority shareholders own 35.16% of the company’s equity—voted against the re-election of the existing directors. However, Taro’s chairman and key promoter Barrie Levitt and the directors were saved by the one-third voting power the Levitt family has in the company by virtue of being its founders. The founding family owns 11% of Taro’s equity.
While Sun has been urging minority shareholders to vote against the management, Templeton changed its stance only recently in favour of Sun. It had previously supported Taro’s resistance to Sun’s takeover plan.
Templeton’s primary concerns about Taro have to do with the indemnification to its directors and the failure of the management to publish audited numbers for three years.
“A major issue has been the indemnification to directors, which we believe they do not deserve,” said a Sun Pharma spokesperson. “But after this meeting, one can say with hard data that Taro shareholders also want the management out. This is the same management that has been claiming from rooftops that it is acting in the interest of minority shareholders—that theory has very soundly been blown away,” he added.
An email sent to Taro remained unanswered.
Analysts said Templeton’s opinion could influence that of other institutional investors.
“Templeton is clearly interested in its shareholder interests and has studied both Taro and Sun carefully. If they believe that the current Taro management hasn’t done anything great for the company and has to go down, then this opinion would affect the stance of other institutional shareholders as well,” said an analyst with a foreign brokerage, who asked not to be identified, citing company policy.
Another Mumbai-based analyst said that the success of Sun, Templeton and minority shareholders in passing the resolution against the re-election of two external directors would help.
“The two new independent directors could be chosen from Templeton and Sun, and they could drive change in the management and get the company accounts audited,” said Ranjit Kapadia of HDFC Securities Ltd.
In 2008, Sun Pharma launched a share tender offer in the US to acquire a controlling stake in Taro, following a unilateral decision by the Israeli firm’s management to terminate a $454 million (Rs2,111 crore now) merger agreement signed by the two companies in May 2007.
Taro’s management challenged this tender offer. It sought orders from an Israeli court to force Sun Pharma to make a special tender offer that would require support from Taro’s majority shareholders. A lower court in Israel had ruled in favour of Sun, but a judgement on an appeal filed by Taro is still awaited from the Israeli Supreme Court.
radhieka.p@livemint.com
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First Published: Mon, Jan 04 2010. 11 13 PM IST