Sun Pharmaceutical Industries Ltd. (BSE: 524715) chairman and CEO Dilip Shanghvi today responded to yesterday's announcement by Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF) that it was terminating the merger agreement between the companies. Taro chairman Dr. Barrie Levitt notified Shanghvi that Taro's board unanimously decided to cancel the deal.
Shanghvi wrote in a public letter, "Taro is not entitled to terminate the merger as per our agreement. Without Sun’s equity contributions totaling approximately $60 million, Taro would be unable to boast of survival, much less a purported financial and operational “turnaround.” Without our investment, Taro would not have been able to meet the bond payment due within days of our first investment. Further, the only reason Taro has been able to keep its lenders at bay is with Sun’s contractual commitments to repay all disclosed indebtedness as part of the merger transactions. In fact, Taro continues to generate very little free cash flow. Taro’s press release yesterday noted that Taro has only $47 million in cash as of March 31, 2008. This means that, if not for Sun’s cash injections last year of about $60 million, Taro would have virtually negative cash - hardly the 'dramatic' improvement of which Taro has boasted."
"While Sun has made every effort to fulfill its obligations under the merger agreement, Taro has failed to honor its side of the bargain and take all necessary action to consummate the merger. Further, Taro has ignored our attempts to discuss, and put forward to Taro’s shareholders, an increase in the merger consideration in order to complete the transaction."
Shanghvi also noted that Sun invested in Taro at the request of the Taro board. He added that in light of Taro’s actions, Sun will now consider all of its options. "We continue to believe that a merger with Sun at $10.25 per share that we have offered to recommend to Sun’s board is in the best interests of all Taro shareholders,” he said.
The Sun CEO claimed that "to our knowledge, no credible offers for the entire company have surfaced and we note in this regard that Taro is required to advise Sun of any and all indications of interest that Taro receives. We also note that in those 10 months, Taro has still not produced audited financials for 2006 and 2007 and there is still no indication from Taro as to when it will do so. Not only does Taro continue to be in breach of its reporting requirements, but any “impediment” this may have imposed to obtaining a superior offer is purely of Taro’s own creation. Again, we note that Sun has consistently been willing to complete the merger without audited financial statements, a highly unusual concession rarely made by a buyer in a corporate acquisition."
Published by Globes [online], Israel business news - www.globes-online.com - on May 29, 2008
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