Public CompanyVote them out: Sun Pharma tells Taro shareholders
CMD Shanghvi’s hard-hitting letter contrasts financial returns of the two firms.
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Sun Pharmaceutical Industries has fired a fresh salvo in its battle to acquire Taro Pharmaceuticals, the Israeli drug major.
In a letter to all Taro shareholders today, it has alleged abuse of shareholders’ money by the promoter Levitt/Moros family and exhorted everyone to vote against the proposed resolutions in the Annual General Meeting (AGM), scheduled on December 31.
There are three resolutions for which approval has been sought by the company’s management from the shareholders — re-election of eight directors, nomination of two external ones and grant of legal indemnification to some of its current and former directors.
“Now is the time to vote against the election and re-election of the proposed directors and against the indemnification proposal,” said the letter, signed by Sun’s chairman and managing director Dilip Shanghvi.
This is the latest in a series of sharp exchanges between the chiefs of the companies since the Taro board terminated a merger agreement in May 2007, after Sun had paid $105 million to acquire a 36 per cent stake in it. Sun has sued Taro in the US courts for not honouring the merger agreement, while Taro challenged the validity of a hostile open offer triggered by Sun Pharma, an issue now before the Israel Supreme Court.
“As Taro’s largest shareholder, it is difficult to accept abuse of shareholders’ money and being left in the dark about the true state of Taro’s financial affairs,” says the Sun letter. It stresses the fact that the company has not been able to issue audited financial statements for some years.
As reported earlier this week, Templeton Asset Management, the leading minority shareholder in Taro with a 10 per cent stake, has also asked the shareholders not to support the existing management and to vote against their proposals.
In a four-page letter, Shanghvi also alleged that Barrie Levitt, Chairman of Taro, has made special efforts prior to the AGM to spread untruths and misrepresentations about Sun Pharma. This, he has said, is to divert Taro shareholders’ attention away from the “all encompassing” protection being proposed to be given to independent directors.
“Instead of working to correct the situation, they (Taro management) now want all Taro shareholders to pay for any damage claims made against them for this failure. I am hopeful that this can be prevented,” he added.
Commenting on Barrie Levitt"s letter to Taro shareholders last week, asking them to shun Sun Pharma, Shanghvi said Levitt was trying to paint a grim picture of Sun’s performance vis-a-vis shareholder returns. Six years ago, Taro was 1.5 times more valuable than Sun, but today, Sun is 17 times more valuable than Taro.
Taro’s share price has decreased 86 per cent in that period, resulting in the loss of $1.6 billion of shareholder value, a direct loss of $1.4 billion to shareholders outside the promoters’ family, Shangvi has said. Sun’s share prices had, in contrast, increased 406 per cent, leading to a $5.1 billion increase in value for Sun"s shareholders.
“While ordinary shareholders of Taro have never received a dividend in Taro’s long history, over the years, members of the Levitt/Moros family have been paid many millions of dollars in salary and bonuses for a performance that brought Taro to the brink of bankruptcy,” he said.
Shanghvi said there is no compulsion on minority shareholders to tender their shares in the open offer (which Sun Pharma may re-launch if the Israeli Supreme Court rules in its favour), contrary to what Levitt is trying to project. Sun Pharma had postponed the open offer earlier, as directed by the Court, until a final verdict.
Alleging the actions of the independent directors have been to aid the promoter family of Taro in trying to renege on contractual obligations with Sun, Shaghvi also denied allegations by Barrie Levitt that a former independent director of Sun’s US subsidiary, Caraco, had raised ‘serious corporate governance controversies’ as a reason for his exit.