Templeton switches sides; backs Sun on Taro takeover

India's Sun Pharmaceuticals Ltd got a boost in its long-standing attempt to get control of Israeli drugmaker Taro Pharmaceuticals, as its main rival Templeton Asset Management switched sides to support Sun's bid.

Sun had invested $454 million in Taro after signing a merger deal with it in May 2007. Exactly a year later, Taro broke the agreement on the plea that the merger was never approved by its shareholders, and that the price ($7.75 per share) offered by Sun was ''too low''.

Since then, the two parties have been engaged in a legal tussle. Templeton, the US-based mutual fund conglomerate which holds 10 per cent in Taro, has so far been supporting Taro's controlling shareholder and chairman Barrie Levitt, demanding that Sun improve its special offer to purchase the company. But now it has changed its tune, and decided to withdraw the appeal.

Templeton has now raised concerns about Taro's health. "Taro's condition continues to deteriorate in terms of proper corporate governance. Under these circumstances, Templeton believes that it must act without delay to enable Taro to emerge from the situation in which it has found itself by removing the barriers for the transfer of control in Taro, for the good of all shareholders," Templeton said while withdrawing from the appeal.

Templeton also raised concerns over the failure of Taro to publish financial reports for several years. It also objected to the way shareholders are being made to depend on press releases, "which have already been shown to be unreliable".

Sun, which owns 36 per cent of in Taro, hasn't responded to the developments. It has been trying to exercise its option to acquire equity in Taro through its arm Alkaloida Chemical Company.