Alleges the Indian drug maker misled shareholders.
The strained relationship between the promoters of Israel's Taro and its long time bidder and major shareholder Sun Pharmaceuticals hit a new low with Taro filing a fresh suit against Sun, alleging that the Indian drug major had kept Taro shareholders in the dark over the US regulatory action against Sun's subsidiary Caraco.
Taro also alleged that Sun used confidential information about Taro, which it gathered as part of the proposed merger transaction, to harm Taro's business relationships and undermine Taro's revenues.
A Sun spokesperson said: "The legal action represents yet another unfortunate attempt by the Taro directors to divert Taro's limited resources to assist the Levitt (promoter) family in their ongoing refusal to comply with their written agreements."
| WHAT TARO CLAIMS SUN FAILED TO INFORM |
| * Recent action by the USFDA against Sun’s majority owned US subsidiary Caraco Laboratories, Inc |
| * The fact that the USFDA action apparently grew out of a long pattern of failure to comply with regulatory requirements |
| * The impact these events and other serious lapses of operational diligence and corporate governance would have on Taro and its shareholders if Sun were to gain control of Taro |
| * Suits filed by shareholders of Caraco alleging violations of securities laws and failure to disclose material facts |
| * Resignation of an independent director of Caraco over serious ‘corporate governance’ issues at Caraco |
In June, US marshals had raided Caraco's manufacturing facilities at Detroit, Farmington Hills and Wixom. Up to 33 different drugs were seized by the US marshals and the US Food and Drug Administration (USFDA) banned Caraco from manufacturing and selling these drugs in the US, until there is an assurance that the firm complies with manufacturing standards.
In May 2007, Sun Pharma had agreed to buy Taro for $454 million, but Taro unilaterally terminated the agreement after a year as Taro's fortunes turned around and it posted profits. Following this, Sun had sued Taro in Israel and the US for not honouring the deal and launched a hostile open offer, which commenced in June 2008 and is still pending due to an injunction issued by the Israeli Supreme Court.
Analysts feel that the latest legal move is meant to further delay Sun's takeover plans.
"Its $110-million investment in Taro will continue to be blocked until the takeover plans materialise," HDFC Securities Vice-President (Institutional Research) Ranjit Kapadia said.
Sun has said it will fight the latest legal action vigorously.
