Sun extends tender offer to Sept. 3; controlling Taro shareholders ordered to comply with option agreement

By Lisa Kerner

Charlotte, N.C., Aug. 27 - Sun Pharmaceutical Industries Ltd. said Taro Pharmaceutical Industries Ltd.'s controlling shareholders, led by company chairman Barrie Levitt, were ordered by the Tel-Aviv Court to deliver their shares under their option agreement with Sun.

It was previously reported that Levitt and the controlling shareholders granted Sun an option to acquire all their shares, including the founders' shares, if a merger of the two companies was not consummated under a May 2007 agreement.

On Tuesday, the Tel-Aviv Court rejected Taro's contention that Sun should have conducted a "special tender offer" under Israeli Law, a Sun news release said.

Taro was ordered to pay Sun's costs related to the litigation.

As a result of the ruling, Sun will file an amendment to its tender offer for Taro waiving some conditions to the offer, including the condition that the controlling shareholders of Taro have performed their obligations under their option agreement with Sun.

The amendment caused Sun subsidiary Alkaloida Chemical Co. Exclusive Group Ltd. to extend its tender offer for Taro shares by one day to 5 p.m. ET on Sept. 3.

Alkaloida began the $7.75-per-share offer on June 30, and the offer was originally set to end July 28, it was previously reported.

Sun noted that 3,627 ordinary shares had been tendered and not withdrawn from the offer as of 5 p.m. ET on Aug. 26.

Taro has advised its shareholders not to tender their shares in what it called a "low-ball" offer.

Dealer manager for the tender offer is Greenhill & Co., LLC. MacKenzie Partners, Inc. is the information agent.

In May 2007 it was announced that Taro agreed to be acquired by Sun for $7.75 per share in cash in a deal valued at $454 million including the refinancing of about $224 million in net debt. Taro terminated the deal on May 28.

According to Sun, Taro was not entitled to terminate the deal. Taro maintained that either party could terminate the agreement after Dec. 31, 2007.

Sun filed an action in the Supreme Court of the State of New York against Taro and its full board of directors. The company wanted the court to order the controlling shareholders to honor their promises under the option agreement and to declare that the merger agreement between the companies was not properly terminated.

Taro filed suit in Israel to keep Sun from preventing a sale of Taro's Irish operations, a prior news release stated.

In addition, Taro filed an action in Israel in May seeking a declaratory ruling that should Sun attempt to purchase Taro shares in an amount that would increase its voting power to more than 45%, it must comply with the special tender offer rules under Israeli law that protect minority shareholders.

Mumbai, India-based Sun makes specialty pharmaceuticals and active pharmaceutical ingredients.

Taro is a pharmaceutical company with offices in Israel and Hawthorne, N.Y.

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