MUMBAI, India, Dec. 17 /PRNewswire-FirstCall/ -- Sun Pharmaceutical Industries Ltd. today sent a letter to shareholders of Taro Pharmaceutical Industries Ltd. (Taro) regarding the Annual General Meeting of shareholders of Taro scheduled for December 31, 2009.
December 17, 2009
In the normal course of events, there really wouldn’t be a need for me to write to you, especially at this time of the year. However, it is the time of year that Taro Pharmaceutical Industries Ltd. holds its Annual General Meeting (“AGM”), this year, on December 31, 2009. In addition to sending the customary proxy statement with Board recommendations on the proposed resolutions, Dr Barrie Levitt, Chairman of the Board of Directors of Taro has made special efforts in spreading lies and misrepresentations about Sun Pharma with, of course, the overt support of the rest of the Taro Board.
As you are well aware, Taro shareholders do not have reliable and valid financial data for now almost 7 years, starting 2003. This failure is a result of the performance of these supposedly independent directors, as members of the Board, in discharging their fiduciary duties towards shareholders. Instead of working to correct the situation, they 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. We urge you to vote at the AGM and reject all such moves of the Levitt/Moros family. While I have little doubt that you will see through this web of distortions, I am writing this letter to set the record straight. Let me attempt to state or clarify our position on some of the more relevant issues.
As you know, Sun entered into a merger agreement with Taro in May 2007 following a Board approved competitive auction process. At the time, Taro admitted to facing a dire financial crisis and Dr Levitt stated in a letter to shareholders that unless additional cash was raised or its debt restructured, it “may be forced to seek relief under applicable liquidation statutes.” In good faith, Sun agreed to provide Taro a lifeline of almost US$60 million cash, at Dr. Levitt’s request, in the form of an equity investment. This was in exchange for the option to purchase the Taro shares held by the Levitt/Moros family at $7.75 per share if the merger were not consummated. It was a simple deal, in our view.
Shareholder wealth
A STUDY IN CONTRAST
Dr Levitt tries to paint a grim picture of Sun’s performance vis-a-vis shareholder returns. Here are some facts for a more balanced perspective. Six years ago, Taro was 1.5 times more valuable than Sun. Today, Sun is 17 times more valuable than Taro. In these past 6 years, Taro’s share price has decreased 86%, resulting in the loss of $1.6 billion of shareholder value. This represents a direct loss of $1.4 billion to shareholders outside the Levitt/Moros family, whose interests are purportedly being protected by Taro’s Board.
Four of the most senior executives in Taro are family members. 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.
Dr. Levitt’s recent letters to shareholders are riddled with misrepresentations, false statements and omissions, including that the upcoming Annual Meeting involves a vote about Sun’s tender offer and that we at Sun are trying to coerce shareholders to tender their shares. This is simply not true.
What are these directors hiding?
SEEKING PROTECTION AGAINST Failure to perform duty
While Dr. Levitt asks shareholders to re-elect the existing directors of Taro on the basis of Taro’s financial turnaround and exceptional growth since 2007, in the next breath he notes that the financial information he relies on for that assertion is unaudited, unreviewed and subject to change. A sampler to highlight the unreliability of the numbers: Taro has reported cash as of December 31, 2008 differently three times so far this year. The latest correction witnessed a drop of approximately $5 million from $78.093 million on August 10 to $73.161 million on December 2.
There are only two explanations for the failure to produce reliable audited financials year after year - the current directors are totally incompetent or they are hiding something. Either way, these directors should be held accountable for their inability to satisfy one of the most fundamental responsibilities of a Board. If these restatements and failure to publish audited financials are not enough to cause concern, the proposal to exempt certain directors from any legal responsibility for, among other things, their failure to produce reliable audited financial statements should sound the alarm.
Rather than working in good faith and in the interests of all shareholders, the actions of the independent directors have been to aid the Levitt/Moros family in trying to renege on its contractual obligations. The Levitt/Moros family is the sole beneficiary of the Israeli litigation brought by Taro and its independent directors to seek a declaratory ruling that Sun’s tender offer must comply with the “special tender offer” rules under the Israeli Companies Law, and effectively delay the closing of the option agreement. While the case is still pending appeal, the disparity between Sun’s “good faith” investment in Taro that saved Taro from insolvency and the “lack of good faith” displayed by Taro’s directors in their attempt to block the tender offer, was declared unequivocally by the District Court of Tel-Aviv in its ruling in favor of Sun:
In the first nine months of 2009 alone, Taro is estimated to have incurred approximately $14.5 million in professional, consulting and other fees related to the unending audit and the various litigation proceedings. The use of shareholders’ funds by the current directors to aid the Levitt/Moros family, that owns only an 11% economic interest in Taro, needs to be brought to an end.
What are the facts?
DEBUNKING LIES ABOUT CARACO
It is a fact that Caraco has had serious problems on account of which Caraco faced a seizure of material at its Michigan facilities in June 2009 by the FDA. Since then, the facility remains closed. However, the Board took swift actions. There is a new team of senior management executives, including a new CEO, spearheading Caraco’s revival effort. The new management team has acted aggressively in response to the FDA’s actions, entering a consent decree with the FDA, and implementing the agreed remediation plan in order to get Caraco’s Detroit plant up and running. So while the FDA related developments are a negative, these haven’t been taken lightly by the Board of Directors of Caraco. Contrast that with the situation at Taro. No reliable numbers for 7 years. Driven almost to bankruptcy. Still the same management team and same directors continue. As if this is not enough, company money and resources are being blatantly used to protect the interests of the same management team who also happen to be a mere 11% owner. Taro’s shareholders should look at the facts rather than the rhetoric.
We urge you to vote AGAINST the election and re-election of directors
and AGAINST the indemnification proposal
Sun urges its fellow shareholders to sign, date and return their proxy cards(#) immediately.
Dilip Shanghvi
Chairman & Managing Director
Established in 1983, listed since 1994 and headquartered in India, Sun Pharmaceutical Industries Ltd. is an international, integrated, speciality pharmaceutical company. It manufactures and markets a large basket of pharmaceutical formulations as branded generics as well as generics in India, US and several other markets across the world. In India, the company is a leader in niche therapy areas of psychiatry, neurology, cardiology, diabetology, gastroenterology, and orthopedics. The company has strong skills in product development, process chemistry, and manufacturing of complex API, as well as dosage forms. More information about the company can be found at www.sunpharma.com.
CONTACT: Uday Baldota, Tel +91 22 6645 5645, Xtn 605, Tel Direct +91 22
66455605, Mobile, +91 98670 10529, uday.baldota@sunpharma.com; Brunswick
Group for Sun Pharma, Erin Becker/Nicki Kahner, +1 212 333 3810; Arad
Communications for Sun Pharma, Gali Dahan, +972 3 7693320; Mira Desai, Tel
+91 22 6645 5645, Xtn 606, Tel Direct, +91 22 66455606, Mobile, +91 98219
23797, mira.desai@sunpharma.com; MacKenzie Partners, Robert Marese, +1 212
929 5500; Greenhill, Ashish Contractor, +1 212 389 1537
