Mumbai: There could be a further delay in Sun Pharmaceutical Industries Ltd’s bid to gain management control of Taro Pharmaceutical Industries Ltd despite an Israeli court ruling in its favour on Wednesday, as the another round of litigations in US courts looms.
Buyout row: Scientists work in Sun Pharma lab in Mumbai. Photograph: Bloomberg
The Israeli court allowed India’s biggest drug maker to go ahead with a tender offer for all the shares of the Israeli company, but Sun Pharma had already waived some conditions so its offer could be closed on 3 September.
This included a key clause that required Taro promoter Barrie Levitt and his family as well as other main promoters to sell their stakes to Sun Pharma before the expiry of the offer period, as per an existing option agreement.
By issuing the tender offer in June, Sun Pharma was exercising an option agreement that was signed between the company and the promoters of Taro in May 2007 as part of a $454 million (Rs1,983.9 crore) acquisition and merger deal. The option agreement gave Sun Pharma rights to buy all the shares held by the promoters if the merger failed. Taro rejected the deal in May 2008.
The tender offer was issued in the US as Taro Pharma is listed there, but Taro objected to it by moving an Israeli court.
“Since the first condition mandating Taro promoters to surrender their shares prior to the closure of the offer (has been changed), there are only two options—first, to expect them (Taro promoters) to sell their shares when the offer is closed as it was mentioned in the offer document, or to move a US court to force them to the do the same,” said a Sun Pharma executive, who did not want to be identified.
Sun has already moved a US court seeking an order to force Taro promoters to meet their obligation under the option agreement. Taro’s management has not met the condition so far.
“It is unlikely that Taro promoters will surrender their shares upon closure, so it is almost sure that Sun’s legal battle in the US will continue for some more time to take control of the Israeli drug firm,” said a Mumbai-based sector analyst with a multinational brokerage.
A Taro spokesman declined to comment. The other conditions amended following the Israeli court’s ruling related to a possible ban on the offer from any court, and any antitrust action. After the tender offer was announced in the US, Sun Pharma sold two of its brands to the Ahmedabad-based Torrent Pharmaceuticals Ltd to avoid an antitrust move in the US.