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Sun Pharma In The News

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US district court dismisses Taro complaint against Sun Pharma

The US district court for the South'ern District of New York on Thursday dismissed Taro's complaint entirely, though it did give the company two weeks to file an amended complaint, a Sun statement said. "Taro could ap'peal, but they don't really have any grounds left for that," said Aarthi Sundari Jayakumar, pharma analyst at Alchemy Share and Stock Brokers. However, the fate of Sun's final purchase of Taro is still in the hands of an Is'raeli court. 
 
How long that could take is anyone's guess, said Ranjit Kapadia, vice-president, institutional research at HDFC Securities. "The dismissal by the US court augurs well, but there is no upside in the stock till some movement happens at the Israel court end," he said. In 2007, as part of the Sun-Taro agreement, Taro received an equity infusion of about $60 million from Sun, that bailed the ailing Israeli company out of a tight financial situation and sent its stock above the offer price. Taro then terminated the merger agree'ment in May 2008, saying that Sun's original offer was too low.
 
This situation led to a hostile takeover bid from Sun. In June 2008, Sun ' which currently holds 36% in Taro'launched a share ten'der offer in the US to acquire a controlling stake in its Israeli parent. Taro filed a US lawsuit against Sun in Sep'tember 2009 to block the open offer, on grounds that the Indian pharma major and its unit Alkaloida failed to make adequate disclosures.
 
The US district court has now dis'missed this charge along with other claims, including breach of contract and misappropriation of trade secrets.
 
" Sun is pleased, but not surprised, by this decision," the company's chair'man and managing director, Dilip Shanghvi, said in the statement. "Sun hopes that the Taro directors will not waste additional time or company resources on any further such tactics."
 
However, even if Sun can proceed with mopping up shares in the US market, it won't make much of a dif'ference because there is limited voting rights attached to these shares. "The key is held by Israel courts. But Isreal, like India, is a developing country, so there is uncertainty of how the process will continue," said Ms Jayakumar. National sentiment, against an acquisition by Sun, may impede impartial proceedings, she said.
 
Sun won a favorable ruling from a Tel-Aviv court on the matter in 2008, but a final decision on the matter is still pending with Israel's Supreme Court. Sun's Alkaloida unit can't proceed with the tender offer until the Israeli Supreme Court passes judgement.