New Delhi: Sun Pharmaceutical Industries Ltd, India’s largest drug maker by market value, failed to dislodge the existing directors at its takeover target Taro Pharmaceutical Industries Ltd, although most minority shareholders in the Israeli firm voted against their re-election on Thursday.
Click here to view a slideshow of caricatured newsmakers from 2009 and participate in The Mint Newsmakers Quiz.
Taro’s chairman and key promoter Barrie Levitt and his slate of directors were saved by the one-third voting power the Levitt family has in the company by virtue of being its founders. At Taro’s annual general meeting in Tel Aviv on Thursday, 78% of minority shareholders, including Sun, voted against the re-election of the existing directors.
The minority shareholders did manage to pass a resolution against the election of two external directors.
Since status quo has been maintained at Taro, Sun will still have to battle it out in the Israeli Supreme Court to take over the company.
The Indian company was buoyed by the stand of the minority shareholders.
“Taro’s shareholders have spoken today, clearly and loudly. Taro equity shareholders holding more than two-thirds of its equity want to remove the Levitts and their associates from the board,” said Dilip Shanghvi, chairman and managing director of Sun, in a statement. “Ironically, it is these same directors who claim to be protecting minority shareholder interests. It is abundantly clear to the shareholders that the Levitts and Taro directors have misappropriated the minority shareholder protection argument to justify all their illegal actions.”
Sun and Taro have locked horns in the Israeli Supreme Court since 2008.
“Even though the current board stays in control, this support for Sun by shareholders sends a signal out to everyone, especially the Supreme Court of Israel, on what the minority shareholders actually want,” a Mumbai-based analyst with a foreign brokerage said.
On 18 December, Sun Pharma, which has a stake of around 36% in Taro, had urged its shareholders to vote against the resolutions proposed by the company’s board for the re-election of directors.
On 15 December, Templeton Asset Management Co. Ltd, which has a 10% stake in Taro, urged shareholders to vote against indemnifying directors, against the re-election of the board of Taro and against the management in view of the fact that they had not published audited numbers for three years.
Sun announced on 21 December that an advisory firm, Proxy Governance Inc., recommended to Taro shareholders that they withhold their votes for re-election of the board of directors of the Israeli firm.
When contacted by Mint, Mark Mobius, executive chairman of Templeton Asset Management, said in an email response that while he was waiting to get more details before making a comment, “we are delighted that (over) 70% voted with us”.
Templeton recently reversed its position of two-and-a-half years on the battle between Sun Pharma and Taro. It had earlier supported Taro’s resistance against Sun’s takeover plan.
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 (Rs2,120 crore) merger agreement signed by Sun Pharma and Taro 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.
Sun, which rose 43% in 2009, fell 0.43% to Rs1,508.80 in Mumbai trading on Thursday, compared with the Sensex’s 0.7% gain. News of the board meeting was announced after trading closed. Taro rose 0.35% on Wednesday to $8.71, according to Bloomberg.
Click here for all Mint 2010 issue multimedia specials.