AN ISRAELI pharmaceutical firm has taken legal action against a rejected Indian suitor which is trying to block the sale of a loss-making factory in Roscrea to a consortium of Irish investors.
Taro Pharmaceuticals, based in Haifa Bay, filed a lawsuit in the Israeli courts last week after Mumbai-based Sun Pharma threatened to place adverts in Irish newspapers alerting potential buyers of the former Miza Pharmaceuticals plant in Co Tipperary that it will make substantial claims for damages from Taro arising from any transaction.
Taro, which makes branded and generic pharmaceuticals, acquired the plant in 2003 with the objective of carrying out research and manufacturing. Miza’s closure of the plant in 2002 led to the loss of 290 jobs. Taro did not commence production at the plant until last year.
Sun agreed to buy Taro for $454 million (€291.67 million) in May 2007 and it has claimed that Taro could not have stayed in business without its investment of some $60 million in the business.
However, the deal was rejected by Taro’s other investors. Sun, now Taro’s largest individual shareholder, increased its offer to some $600 million earlier this year. But Taro cancelled the deal four weeks ago.
The identity of the proposed buyers of the Irish plant and the consideration agreed is not known. Sun has questioned the deal in strong terms, however, claiming in public statements that one of the potential buyers has a “close relationship” with Taro’s senior management.
In an open letter to Taro two days ago, Sun chairman Dilip Shanghvi claimed the company had mishandled the Irish asset and agreed unfavourable sale terms. He also claimed the sale process was not transparent.
Mr Shanghvi was responding to a letter to Taro shareholders from its chairman, Barrie Levitt, in which he said the firm agreed to sell the Irish business to Irish investors last year before the first agreement with Sun.
“The Irish operations are not part of our core business, and have been costing us approximately $800,000 per month to maintain. Their sale would have substantially enhanced our profitability and cash resources. Nevertheless, Sun, whose consent to the sale was required under the terms of the merger agreement, repeatedly refused to agree to the transaction,” Mr Levitt said.
“Our board continues to believe that the sale of our Irish operations is in the best interest of the company and will substantially improve our profitability and cash position. Yet, while the merger agreement has been terminated, Sun has continued its opposition to the sale, and has recently threatened to place advertisements in the Irish press opposing it.”
Taro initiated legal action against Sun to stop it from engaging in practices that would damage its ability to maximise the value of the plant, he said. “At the same time, we invited Sun to submit an offer to purchase the Irish operations if it wishes to do so.” This was rejected by Mr Shanghvi. “As we see it, you are proposing to sell Taro Ireland, after investing $50 million in it, and at the very point when it is on the cusp of generating potentially substantial revenue, to a party closely related to senior management, and for a price less than the value of the land on which the facilities stand . . . It is no surprise then, that Taro is unable to demonstrate having undertaken a robust sale process,” he said.
“The only rational reason we can imagine for a sale so economically and strategically unfavourable to Taro and its shareholders is that it forms part of your concerted effort to discourage Sun from exercising its right to acquire Taro.”
Neither company responded to queries yesterday from The Irish Times.
