The suit filed against Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) in the New York court regarding the acquisition of the Mexican firm Rimsa will probably not be the only legal action Teva will have to conduct regarding this acquisition.
Yesterday, the Central District Court received a request to file a derivative suit against Teva, company directors and executives, including CEO Erez Vigodman and CFO Eyal Desheh, and against Citigroup, which provided Teva with consultation regarding this acquisition. The request claims that the respondents have foregone the duty of care and had been negligent in their conduct in a way that resulted in damage to Teva.
The request was filed by shareholders with a small holding in Teva: Gur Tzemach, controlling 99 shares, and Y.A.A.S Investments, controlling 670 shares, via advocates Ohad Rosen, Hagai Kalai and Jaboc Sabo from the Kalai-Rosen law firm. "The extent of the damage to Teva remains unclear but it is conservatively estimated at hundreds of millions of dollars," the request says, with the damage referring to the discrepancy between the price paid for the company and the company's valuation, "given that Teva had known all the information it discovered after the acquisition beforehand."
Teva acquired Rimsa for $2.3 billion one year ago and finalized the deal in March. Two weeks ago, Rimsa's former owners, the brother Espinosa Abdala, filed a suit against Teva, claiming that it seeks a retroactive discount under false pretexts of fraud. Teva, on the other hand, claims to have discovered violations committed by the sellers, and that it will request remedies for breach of contract and deceit; "we will respond with force to this lawsuit," Teva said then.
The current proceedings refer to these facts and the request says that Teva had sufficient time to conduct due diligence via its consultants both before and after the acquisition, and closing the deal. Teva claimed to have discovered the violations (in the production process and in reports to the regulator) in July, while the sellers claim that these are unfounded accusations. The request says that without determining which party is right, "it is clear that in either case the respondents (Teva and its executives - S.H.-V.) were negligent. "If Teva is right, and it discovered that Rimsa's data differ from figures reported to the authorities - the respondents had been negligent in conducting due diligence, or supervising the party which carried it out…and if the Espinosa brothers are right and Teva's claims are unfounded and are intended to undo an unsuccessful deal, which is a result of Teva's misunderstanding of the Mexican market, the respondents were negligent and acted rashly in acquiring the company, without making the necessary checks." They claim that Teva should have known that the Mexican market is "hazardous," and therefore been "particularly vigilant."
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016