New Delhi: Sun Pharma has threatened legal action against Israel’s Taro Pharmaceuticals, which unilaterally terminated the $454-million merger deal with the Indian firm on 28 May.
Rebuffing allegations made by the Israeli firm, Sun Pharma chairman and managing director Dilip Shanghvi in a letter written to Taro chairman Barrie Levitt, said Taro was not entitled to terminate the merger as per their agreement.
“In the light of Taro’s action, Sun will now consider all of its options, including without limitation commencing legal proceedings as to Taro’s right to terminate the merger agreement,” Shanghvi said in his letter.
Taro had yesterday (28 May) said its Board of Directors unanimously determined that permitting the merger agreement, signed in May 2007, to remain in force was no longer in the best interest of the company.
Sun Pharma had entered into an agreement with Taro to acquire the Israeli firm for an all cash deal of $454 million.
Shanghvi, in his letter, also dismissed Taro’s claims that the merger agreement had become stale and did not reflect the “dramatic operational and financial turnaround that the company had achieved since last year”.
“Without Sun’s equity contributions totalling approx 60 million dollars, Taro would be unable to boast of survival, much less a purported financial and operational ‘turnaround´,” he said.
“Without our investment, Taro would not have been able to meet the bond payment due within days of our first investment,” he added.
Shanghvi also pointed out Taro had only $47 million in cash as of 31 March, 2008. “This means if not for Sun’s cash injection last year of about $60 million, Taro would have virtually negative cash — hardly the dramatic improvement of which Taro has boasted.”
He refuted Taro’s statement about Sun making a condition for removal of one-third disinterested minority vote requirement when the Indian firm made a revised offer of $10.25 a share.
“You may recall your own proxy statement, which you refer to in your letter to me, specifically states Taro only included the one-third disinterested vote requirement ‘out of an excess of caution’ based on your disclosure,” the Sun Pharma chairman wrote.
He said advisers of the two companies had in the past discussed whether such a vote was actually necessary, but had not reached any substantive agreement on the issue.
“As a matter of fact, one of your own legal advisers had suggested that at a right price,Taro would be prepared to remove it as a condition to merger,” Shanghvi said in his letter to Levitt.
He also refuted the claims by Taro that several third parties have expressed interest in pursuing alternative transactions with Taro and the existence of merger agreement and lack of audited financial statements have inhibited discussions with third parties, saying these were misleading.
“Sun agreed to remove the non-solicitation provision from the merger agreement almost 10 months ago,” he added.