Several parallel legal cases are underway in the struggle for control of Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF) between chairman Dr. Barrie Levitt and India's Sun Pharmaceutical Industries Ltd. (BSE: 524715). While the companies wait for Israel's Supreme Court to rule on one appeal, Taro chalked up a victory in Tel Aviv District Court.
Yesterday, Tel Aviv District Court Judge Meir Yifrach dismissed demands for remedy sought by Sun Pharmaceutical. He ruled that Sun failed to show legitimate cause for its demands. He also dismissed the declarative remedies sought by Sun Pharmaceutical concerning Taro's failure to publish audited financial reports, saying that this matter was outside the purview of the case.
Sun Pharmaceutical had sued Taro and its directors, and demanded declarative motions to order the company to publish audited financial reports and sought declarative remedies relating to the lack of publication. In its statement of defense, Taro sought dismissal of the opening motion as well as Sun Pharmaceutical's demands to separate the remedies.
Taro has not published audited financial reports since 2003, resulting in, among other things, Nasdaq relegating the share to the Pink Sheets.
On Thursday, Taro held a stormy general shareholders meeting in Haifa. The majority of shareholders voted to reelect all the directors who were up for election, except for statutory external directors, handing a victory to Levitt, since Sun Pharmaceutical sought to block the appointments.
Sun Pharmaceutical said that Taro's minority shareholders sent a strong message of disapproval to Levitt and his continuing control of Taro, because the shareholders voted decisively against the election of Taro's external director nominees. In addition, 78% of Taro's minority shareholders (shareholders not affiliated with the Levitts or Sun) voted against keeping the Levitt slate of directors. A similar number voted against the board's indemnification proposals.
Sun Pharmaceutical chairman and managing director Dilip Shanghvi said, "Taro equity shareholders holding more than two-thirds of its equity want to remove the Levitts and their associates from the board." He added, "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. With such an unambiguous rejection by minority shareholders, the Levitts and Taro directors now have lost this only crutch."
The Levitts and Sun Pharmaceuticals have been locked in a struggle for control of financially troubled Taro since 2007, when the companies signed a deal for Sun to acquire control of Taro at $7.75 per share. Sun injected $60 million into Taro as part of the merger. After Taro's share rose above the deal price, Levitt unilaterally cancelled the agreement, leading to the court battles.
Taro's share closed at $8.88 on Thursday.
Published by Globes [online], Israel business news - www.globes-online.com - on January 4, 2010
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