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Taro sues India’s Sun Pharma for not disclosing key info on Caraco in buy-out offer

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Wednesday, September 30, 2009, 12:32 This news item was posted in Industry category and has 0 Comments so far.

US FDA’s action could harm Taro if Sun were to gain control, alleges the Israeli firm

Israeli firm Taro Pharmaceuticals Industries Ltd has filed a lawsuit against India’s Sun Pharma alleging violations disclosure norms in the latter’s tender offer.

In its lawsuit filed in federal court in Manhattan, Taro alleged that Sun Pharmaceutical Industries Ltd., claiming the Indian drugmaker’s tender offer for Taro failed to disclose key information.

Sun Pharma didn’t include some key information about Food and Drug Administration violations by Sun’s U.S. generics affiliate Caraco Pharmaceutical Laboratories Inc. and the associated seizure of some of its products.

Sun Pharma own majority stake in U.S. subsidiary Caraco Pharmaceutical Laboratories Ltd. Recently, US FDA seized $20 million in products, in a follow-up action for manufacturing defects including oversized tablets at Caraco’s plants.

US FDA’s action could result in major impact of the events as harmful to Taro if Sun were to gain control of the company, Taro alleged.

Also, Sun did not disclose securities suits filed by Caraco shareholders and misused Taro’s confidential information, Taro said.

“Sun is seeking to coerce shareholders of Taro to sell their Taro stock to Sun for a grossly inadequate price by means of a tender offering statement that has been amended over 25 times,” Taro said in its complaint.

Sun illegally used confidential information to disrupt and harm Taro’s customer relations and undermine Taro’s revenue.

Through the litigation Taro is seeking to block Sun’s use of its tender offer materials as well as damages and an injunction.

The latset U.S. District Court filing in New York is in addition to ongoing pending litigation involving Taro, Sun and others in Israel and New York state courts.

Recently, India’s Sun Pharma has got cleared of US Anti Trust Act to acquire all outstanding ordinary shares of Taro Pharmaceutical Industries Ltd, the company announced in a press statement.

The waiting period mandated in connection with the tender Offer by its Alkaloida Chemical Company Exclusive Group Ltd to acquire all outstanding ordinary shares of Taro Pharmaceutical Industries Ltd expired on September 11, 2009.

Sun Pharma’s ongoing efforts to acquire controlling stake in Taro reached a flash point in June when the Mumbai-based company filed a law suit in New York against the Israeli firm and its board while maintaining that it exercised the option of acquiring all shares of Taro held by controlling shareholders.

Following this, Sun Pharma it would commence a tender offer for all ordinary shares as required by the option agreement in the next few days. Sun reiterated the option agreement also required that it specifically commenced its tender offer at $7.75 per share within 30 days after termination of the merger agreement.

Sun Pharmaceutical currently holds around 36% stake in Taro.Sun Pharma launched the open offer to acquire additional shares of the Israeli drug company. Sun and Taro had signed the $454 million merger agreement in May 2007. However, Taro unilaterally terminated the merger agreement, after one year of signing the agreement.

As a reason for terminating the agreement Taro said the price offered by Sun was not satisfactory.

Later, Sun claimed in the event the merger was not consummated, Taro’s controlling shareholders led by Taro’s Chairman Barrie Levitt, granted Sun Pharma an option to acquire all their shares, including all of the founder’s shares.

In the meantime, Sun Pharma said it has filed an action in the Supreme Court of the State of New York against Taro and its full Board of Directors.

Sun launched an open offer at a price of $7.75 per share in June last year through its subsidiary to acquire all shares of Taro, which was again legally challenged by the latter. The Supreme court has currently prohibited Sun Pharma from closing the offer until it gave a verdict on the issue.

The Offer is currently subject to a continuing order issued by the Supreme Court of Israel temporarily prohibiting the closing of the Offer until the Supreme Court issues a decision on the appeal of the litigation commenced against Alkaloida and its affiliates by Taro and certain of its directors regarding the applicability of the special tender offer (STO) rules under the Israeli Companies Law to the Offer.

The Tel-Aviv District Court had previously ruled in favor of Sun that a special tender offer was not required. The Offer is scheduled to expire on the fifth business day following the date Alkaloida announces a ruling on the appeal of the STO litigation or if, prior to such ruling, the temporary order is otherwise lifted. If the conditions to the Offer have not been satisfied  waived by Alkaloida, Alkaloida reserves the right to further extend the Offer.

The Offer was commenced on June 30, 2008 in order to comply with the terms of the Option Agreement between Alkaloida and the controlling shareholders of Taro.

Alkaloida exercised its options to acquire shares of Taro from the controlling shareholders on June 25, 2008. The Option Agreement required Alkaloida, promptly after exercising the options, to commence a tender offer at USD 7.75 per Ordinary Share of Taro held by other shareholders. As of 5:00 p.m., New York City time, on September 11, 2009, 32,202 Ordinary Shares had been tendered and not withdrawn from the Offer, according to the release.

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