Now, Templeton favours Sun as Taro ‘deteriorates’

After over two-and-a-half years, there is some good news for Sun Pharma.
Franklin Templeton, the mutual fund giant, which has been a co-appellant along with Israeli pharma major Taro Pharma against the Mumbai-based Sun, has decided to withdraw the appeal.

Sun shares surged Rs 81.85 or  5.62% to Rs 1538.80 on the BSE following the news.
Templeton has a 10% stake in Taro and has been supporting the Israeli firm’s chairman Barrie Levitt. Levitt is also a controlling shareholder in Taro. Templeton raised serious concerns about Taro’s health. “Taro’s condition continues to deteriorate in terms of proper corporate governance …Under these circumstances, Templeton believes that it must act without delay to enable Taro to emerge from the situation in which it has found itself by removing the barriers for the transfer of control in Taro, for the good of all shareholders,” Templeton said while withdrawing from the appeal.

Templeton also raised concerns over the failure of Taro to publish financial reports for several years. It also objected to the way shareholders are being made to depend on press releases, “which have already been shown to be unreliable”.

Sun, which has 36% in Taro, hasn’t responded to the developments. It has been trying to
exercise its option to acquire equity in Taro through arm Alkaloida Chemical Company.

The Taro-Sun episode has taken many twists and turns since May 2007, when the companies signed a merger agreement for $454 million. One year after signing the agreement, Taro unilaterally terminated the agreement citing insufficient pricing. Later, Sun claimed that it was given an option by the controlling shareholders including Barrie Levitt to acquire all their shares. Accordingly, Sun made an offer $7.75 a share in June 2008 through its subsidiary.

However, this attempt was challenged by Taro. Sun also filed a suit against Taro and its board of directors in the Supreme Court of New York.

As the litigation was being heard, the Israeli company also filed a suit against Sun alleging violations in disclosures made by Sun in its tender documents to acquire shares.

The litigation has been on with both the companies going in for suits and appeals including in the Israeli Supreme Court. Templeton was also a co-appellant.

However, Templeton now seems to have found certain discrepancies in the way Taro has
been taking the episode forward.