HAWTHORNE, N.Y., June 19, 2008 (PRIME NEWSWIRE) -- Taro Pharmaceutical Industries Ltd. (Pink Sheets:TAROF) ("Taro" or the "Company") today announced that it is sending a letter to its shareholders updating them on certain developments regarding the previously announced termination of its merger agreement with a subsidiary of Sun Pharmaceutical Industries Ltd. The full text of the letter is set forth below:
June 19, 2008
Dear Fellow Shareholder:
I want to update you on several important developments that have
occurred since I last wrote to you. As you will see, Taro has been
making significant progress and our operational and financial
performance shows that a turnaround of substantial proportions is
underway. This progress, along with the positive outlook we have for
continuing improvement, has led us to make other strategic moves as
well.
Perhaps most importantly, on May 28, 2008, we announced that our
Board of Directors had unanimously voted to terminate the merger
agreement we entered into over a year ago with a subsidiary of Sun
Pharmaceutical Industries Ltd. ("Sun").
As you may recall, the merger agreement provided for the
acquisition of Taro by Sun for $7.75 per share and allowed either
party to terminate after December 31, 2007. There was significant
shareholder opposition to the merger, and the shareholders meeting to
vote on the merger was canceled with Sun's approval. While Sun
recently offered to raise the merger price to $10.25 per share, our
Board of Directors unanimously determined that this price was
financially inadequate.
The Board made its decision based on the following factors,
among others, as well as on advice received from Merrill Lynch, the
Company's financial advisor:
. The dramatic operational and financial turnaround that we have
achieved since last year - for 2007, we announced estimated net
sales of approximately $313 million and net income of
approximately $21.1 million, as compared to an estimated loss of
approximately $141 million in 2006; and for the first quarter of
2008, we announced net sales of approximately $78 million and net
income of approximately $7.5 million;
. The future value that we expect to achieve from changes in our
business model, including the sale of our Irish operations
discussed below; and,
. The value in our new product pipeline.
Our Board also noted that Sun's proposed $10.25 increased merger
price was the same price Sun had paid in February of this year to
acquire the minority position in Taro held by Brandes Investment
Partners, L.P. ("Brandes"), a large shareholder that had opposed
Sun's original $7.75 merger proposal. Significantly, when Sun
purchased the Brandes shares, Taro had not yet released financial
results for the year-ended December 31, 2007 or the first quarter of
2008. Thus, the extent of our turnaround was unknown to the public.
In addition, Sun's proposed increased price reflected no control
premium; our Board felt that it was unfair for Sun to seek to acquire
the entire equity interest in the Company at the same price it had
paid for Brandes' minority interest.
I want to assure you that the Board did not act to terminate the
merger agreement until after Sun had repeatedly rebuffed our attempts
to engage in meaningful price negotiations. However, given Sun's
steadfast refusal to negotiate, the Board concluded that no useful
purpose was served by continuing the year-old merger agreement in
effect, and that the significant operational constraints contained in
the merger agreement were interfering with our ability to manage our
business for the benefit of all of our shareholders.
Perhaps the most significant example of the negative impact
these constraints have had on the Company relates to our effort to
sell our operations in Ireland. In 2007, before the merger agreement
with Sun was signed, we reached an agreement in principle to sell our
Irish subsidiary to a group of Irish investors. 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.
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. To protect the
interests of Taro and our shareholders, on June 15, we commenced
litigation in Israel to stop Sun from engaging in practices that we
deemed detrimental to our ability to maximize the value of the Irish
operations in a sale. At the same time, we invited Sun to submit an
offer to purchase the Irish operations if it wishes to do so. We will
give any proposal submitted by Sun the same serious consideration
that all bona fide offers receive.
This is the second lawsuit against Sun we felt it was necessary
to file in order to protect your interests. On May 28, in conjunction
with the termination of the merger agreement, we filed an action in
Israel seeking, among other things, a declaratory ruling that, should
Sun attempt to purchase Taro shares in an amount that would increase
its voting power to more than 45 percent, it must comply with the
Special Tender Offer rules under Israeli law, which provide important
protections for minority shareholders. We will keep you advised of
developments in this lawsuit. However, in the meantime, should Sun
commence a tender offer for Taro shares, our Board strongly
recommends that you not take any hasty action with respect to your
shares, but instead await receipt of important information from the
Company concerning the Board's evaluation of any such offer and other
matters required to be disclosed under applicable law.
Turning to our current operations, the progress we reported for
the last year and for the first quarter of 2008 continues into the
second quarter. While the quarter is not yet over, based on
preliminary information, it looks like our second quarter sales and
net income will be at least equal to or above those achieved in the
first quarter.
As for our financial position, we continue to be current with
all of our lenders and believe, in the ordinary course, that we
should have sufficient liquidity to meet our cash requirements for
the foreseeable future, subject to the continuing support of our
lenders. While we continue to be out of compliance with certain
reporting requirements of the debt instruments due to the lack of
audited financial statements, we continue to discuss the situation
with our lenders and we are working diligently with our auditors to
resolve these issues and obtain completed audits for the years ended
December 31, 2006 and 2007. We believe the availability of audited
financial statements should facilitate the relisting of the Company's
ordinary shares on NASDAQ.
Finally, we believe that the improvements we are seeing in our
operations will continue for the foreseeable future. As I noted, the
turnaround is significant and our new business model seems to be
working well, and, in fact, gaining momentum.
You should note that all of the financial information and
estimates included in this letter are unaudited and are subject to
further review and possible change.
I want to assure you that Taro's Board of Directors will
continue to take all actions necessary to protect the interests of
the Company and all of our shareholders.
On behalf of the Board of Directors,
/s/
Barrie Levitt, M.D.
Chairman of the Board
Taro is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit the Company's website at www.taro.com.
The Taro Pharmaceutical Industries Ltd. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4733
SAFE HARBOR STATEMENT
Certain statements in this letter are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can generally be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "estimate," "should" or other similar words or phrases or by use of statements that relate to future events. Although Taro Pharmaceutical Industries Ltd. believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurances that its expectations will be attained. Many factors could cause actual results to differ including the risks detailed from time to time in the Company's SEC reports. Forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.