IsZo Capital & Black Horse Write to Taro Pharmaceutical Demanding Information Relating to Sun Pharmaceutical Going Private, Squeeze-Out Merger

NEW YORK, Aug. 31, 2012 /PRNewswire/ -- IsZo Capital Management LP and Black Horse Capital Advisors LLC, two of the largest minority shareholders of Taro Pharmaceutical Industries Ltd. (NYSE: TARO), announced today that they delivered the following letter to Taro exercising their respective legal rights under Israeli law to demand certain information relating to the approval by Taro's Board of Directors, Special Committee and Audit Committee of the Agreement of Merger, dated as of August 12, 2012, by which Sun Pharmaceutical Industries Ltd. (BSE: SUNPHARMA), Taro's controlling shareholder, proposes to take Taro private and squeeze out Taro's minority shareholders.

August 31, 2012

VIA COURIER
Taro Pharmaceutical Industries Ltd.
Euro Park (Italy Building)
Yakum Business Park, Yakum 60972, Israel
Attention: General Counsel

Re: Pending Sun/Taro Going Private, Squeeze-Out Merger

       IsZo Capital Letters dated November 29, 2011, December 13, 2011,
       December 23, 2011, February 15, 2012 and May 10, 2012

Ladies and Gentlemen:                                                          

IsZo Capital Management LP ("IsZo") and Black Horse Capital Advisors LLC ("Black Horse"), two of Taro's largest minority shareholders, write to you as follows:

1.  On August 13, 2012, Taro Pharmaceutical Industries Ltd. ("Taro" or the "Company") announced that it had entered into an Agreement of Merger, dated as of August 12, 2012 (the "Merger Agreement"), with Sun Pharmaceutical Industries Ltd. and certain of its affiliates ("Sun"), pursuant to which it is intended that a wholly owned subsidiary of Sun merge with and into Taro (the "Merger"), whereupon Taro will become a private company, wholly owned by Sun, and its shares will cease to be traded on the New York Stock Exchange (the "NYSE"). The purpose of the Merger is for Sun, Taro's controlling shareholder, to squeeze out Taro's minority shareholders and acquire Taro's remaining share capital not already owned by Sun at the bargain price of $39.5 per share.

2.  We would like to remind Taro that Sun's previous inadequate and opportunistic offer to purchase the minority shares of Taro for $24.5 per share (the "Previous Offer") was rejected by Taro's Special Committee, which was formed to evaluate the Previous Offer, ten months after the date on which the Previous Offer was first disclosed publicly.

Remarkably, in contrast to the protracted delay by Taro's Special Committee in determining that the Previous Offer was grossly inadequate, substantially undervalued Taro and was clearly deserving of rejection, Taro's Special Committee, Audit Committee and Board of Directors moved quickly to approve the Merger Agreement, under which it is proposed that Taro be taken private by its controlling shareholder and its minority shareholders be squeezed out at what appears to be an egregiously inadequate price, only three weeks after the Previous Offer was rejected by the Special Committee. 

These actions raise serious concerns about the process conducted by Taro's Special Committee, Audit Committee and Board of Directors in connection with the Merger, including questions relating to the (a) information examined and discussions held by Taro's Special Committee, Audit Committee and Board of Directors prior to the approval of the Merger Agreement, (b) compliance by Taro with the U.S. disclosure requirements that apply to it as a public company with shares traded on the NYSE and (c) exercise of fiduciary duties by Taro's directors for the benefit of Taro's minority shareholders, as required by law.

3.  In accordance with Sections 184(3) and 185(a)(1) of the Companies Law, 1999 (the "Companies Law"), as shareholders of the Company, IsZo and Black Horse have the right to review each document relating to acts or transactions that are required to be approved in accordance with the provisions of Section 275 of the Companies Law.

Accordingly, as the consummation of the Merger requires the approval of Taro's shareholders pursuant to the provisions of Section 275 of the Companies Law, as Taro shareholders we have the right to review each document relating to the Merger.  This includes, for the avoidance of doubt, any document relating to the Previous Offer, as the Previous Offer set the stage for the discussions conducted between Sun and Taro with respect to the Merger, as well as any document (including proxies, powers of attorney and voting cards, in each case, whether submitted electronically or in physical form, as well as copies of the Related Documentation (as such term is defined in the letters, dated February 12, 2012 and April 3, 2012, sent by our counsel on our behalf to Taro's counsel)) relating to voting at the Company's 2011 General Meeting (the "2011 General Meeting"), at which Taro's shareholders allegedly approved the grant of indemnification, insurance and exculpation protections to Taro's directors and officers, including for violations in connection with a merger or other going private transaction.  

4.0  In light of the foregoing, pursuant to Sections 184(3) and 185(a)(1) of the Companies Law, we demand that Taro provide us, within seven days from the date of this letter, copies of each document relating to the Merger, the Previous Offer and the 2011 General Meeting, including and without derogating from the generality of the foregoing, the following documents and information (the "Related Documents"):

4.1.  The minutes of all meetings of Taro's Board of Directors, Audit Committee and/or Special Committee, in which the agenda included the discussion and/or approval of the Merger and/or the Previous Offer.

4.2.  All schedules (including disclosure schedules) and exhibits to the Merger Agreement and any confidentiality agreements, exclusivity agreements, voting agreements, side letters and any other ancillary agreements relating to the Merger Agreement.

4.3.  All materials (including background materials) prepared, presented or conveyed in any manner to Taro's Board of Directors, Audit Committee and/or Special Committee with respect to the Merger and/or the Previous Offer, including financial valuations, fairness opinions, financial projections (including pro forma reports), legal opinions (including, for the avoidance of doubt, any legal opinion relating to the obligation of Taro to file publicly any reports with respect to the Merger and the Previous Offer), any information upon which Taro's management has based its repeated assertions that Taro's financial performance is not or is not likely to be sustainable and any other information relevant to the decision of Taro's Board of Directors, Audit Committee and Special Committee to recommend the Merger to Taro's minority shareholders, including any information and documents prepared or furnished by the advisors and legal counsel to the Special Committee, including Citigroup Global Markets Inc., Goldfarb Seligman & Co and Willkie Farr & Gallagher LLP. 

4.4.  Taro's current registry of shareholders and the most up to date list of Taro's shareholders in its possession.

4.5.  A list of shareholders of Taro with respect to which Taro and/or any of its directors and/or officers is aware of any "personal interest" (as defined in the Companies Law) that any such shareholders may have in the proposed Merger.

4.6.  All benefit plans, option agreements, warrants and any other compensation agreements, arrangements or understandings between Taro and its directors and officers, including a description of all other benefits granted to Taro's directors and officers that will take effect if the Merger is consummated. 

5.    We are exercising our legal right as shareholders of Taro to review all of the relevant information in connection with the Merger and the Previous Offer in order to ensure that we make an informed decision as shareholders at the Company's Shareholders Meeting, which will be convened to vote upon the Merger.

6.    Please send copies of all Related Documents to our counsel at Herzog Fox & Neeman copied to this letter below.

7.    This letter does not derogate or exhaust any of our rights, including the right to assert a claim for any damages or seek any fees and costs we may sustain or incur, including attorneys' fees, in enforcing our legal rights as Taro shareholders.

Sincerely,

/s/ Brian Sheehy                                            
Brian Sheehy
Managing Partner
IsZo Capital Management LP

/s/ Dale Chappell
Dale Chappell
Managing Partner
Black Horse Capital Advisors LLC

SOURCE IsZo Capital Management LP