Ahead of its upcoming annual general meeting on December 31, 2009, Israeli drug firm Taro Pharmaceutical today asked its shareholders to reject a takeover bid by India's Sun Pharmaceuticals.
Taro, which has been warding off a takeover bid by the Indian firm ever since their proposed $454 million merger deal was called off in 2008, warned the shareholders that if Sun was successful in its bid, then the Israeli firm may be facing the same fate as that of Caraco Pharmaceutical Labs.
"Sun has been bad for Caraco and Sun could be disaster for your investment in Taro," Taro Pharmaceutical Chairman and Managing Director Barrie Levitt said in a letter to shareholders.
Sun had acquired a majority stake in Caraco in 2004. In June this year US regulators had banned Caraco from selling drugs made at its three US plants after seizing 33 drugs and raw materials citing deviation from manufacturing standards.
"You should be aware of the serious corporate governance and legal controversies facing Sun as a result of its stewardship of Caraco, a US-based company in which Sun controls a majority of the shares."
"We believe that Sun's conduct at Caraco raises serious questions about what may happen to minority shareholders of Taro if Sun is able to gain control of your company (Taro)," the letter added.
Levitt, in his letter, further said "In the last eighteen months, Caraco's stock price has declined over 65 per cent, from $17.22 as of May 30, 2008 to $5.89 as of December 10, 2009, and lawsuits by unhappy Caraco shareholders ensued."
Currently, Sun and Taro are locked in a legal battle both in Israel and the US over the unilateral termination of their proposed merger deal signed in 2007 by Taro.
Earlier this week, Taro had written another letter to its shareholders alleging that Sun Pharma is attempting to seize control by waging a proxy war.
Levitt said Sun has been trying to increase its stake in Taro by attempting to exercise warrants.
"We are concerned that if Sun seizes control of Taro, minority shareholders may fall victim to the same fate as the minority shareholders of another Sun-controlled public company Caraco Pharmaceutical Laboratories," Levitt said in the letter.
