Mumbai, October 29, 2009:
On Taro, Shangvi says, it isn’t a problem, it’s an opportunity which Sun tried to exploit. In May 2007, Sun Pharma had agreed to buy Israel-based Taro for $454 million. Taro unilaterally terminated the agreement after a year, as Taro’s fortunes turned around to post profits.

Following this, Sun had sued Taro in the US for not honouring the deal and launched a hostile open offer to acquire the remaining shares, invoking provisions of the merger agreement. Taro had questioned the validity of the special tender offer in an Israeli court, which ruled in favour of Sun Pharma. Now the issue is pending before the Supreme Court of Israel, for the final judgment.

“Our lawyers say we have a very strong case and we are confident of winning the case,” said Shanghvi. Sun Pharma is now the largest stakeholder in Taro, with 36 per cent of equity, and will have to shell out another $40 million or so to acquire another five million shares to access about 12 per cent shareholding of the promoter family of Taro Chairman Barrie Levitt.

The hostile situation is not a deterrent for Sun Pharma in pursuing the acquisition, even after two years. So far, none of the executives or staff of Taro, other than the promoters, have opposed takeover by Sun Pharma, says Shanghvi.

“It is a case of honouring a signed agreement. Whatever may be the outcome, our investment in Taro is still profitable,” sums up Shanghvi. Sun has invested about $105 million in Taro to acquire its 36 per cent stake.