Bitter dose

Mumbai, Dec 18: Sun Pharmaceutical Industries, which has been embroiled in a two-year battle to acquire Taro Pharmaceuticals, today asked the shareholders of the Israeli drug firm to vote against management-sponsored resolutions seeking to re-elect a slate of directors at the annual general meeting on December 31.

The battle has only intensifed in recent weeks after Barrie Levitt, Taro’s chairman and managing director, urged its shareholders in separate letters to reject a takeover bid by Sun Pharma. He had also alleged that Sun Pharma was attempting to seize control by waging a proxy war.

Taro is seeking shareholders’ support for the election of 11 directors, including Barrie Levitt and Daniel Moros, who is the vice-chairman of the company. Another resolution is seeking the appointment of two external directors.

The Levitt/Moros family controls Taro with a combined holding of just 11 per cent.

Levitt recently wrote to Taro shareholders drawing attention to the travails of Caraco Pharmaceuticals — the US subsidiary of Sun Pharma — which shut down a plant after the US Food and Drug Administration (FDA) detected violations of manufacturing standards. He had said Taro could face similar trouble if Sun took over the Israeli drug maker.

Dilip Shanghvi, chairman and managing director of Sun Pharma, slammed Taro’s existing management for failing to come out with audited financial results for seven years and seeking to indemnify themselves against litigation.

Shanghvi said Taro shareholders did not have reliable and valid financial data of the company for almost seven years now, starting 2003.

Rebutting Levitt’s observation that Sun Pharma had not given adequate returns to its shareholders, Shanghvi said six years ago, Taro was 1.5 times more valuable than Sun Pharma. The Indian firm is now 17 times more valuable than Taro. During this period, Taro’s share price had dipped 86 per cent, while Sun Pharma’s had risen 406 per cent, giving way to a $5.1-billion rise in value for its shareholders.

Responding to Levitt’s views about Caraco, Shanghvi said in 1997, when Sun Pharma bought a majority stake in Caraco, shares of the US firm traded below $1 per share and the firm’s aggregate market capitalisation was less than $10 million. As of December 11, 2009, Caraco’s shares traded at nearly $6 per share and, despite the FDA actions, its market capitalisation was over $230 million, he said.