Sun Pharmaceuticals, which recently questioned the legality of the decision of Israel’s Taro to terminate the firms’ merger, is now looking to block the latter’s sale of its subsidiary in Ireland.

At the end of last month, Taro pulled out of the proposed $454-million merger agreement with Sun, saying that it was “financially inadequate” and also announced its intention to sell its multi-purpose manufacturing and research facility in Roscrea to a group of Irish investors. However Sun chairman Dilip Shanghvi has fired off a letter to his Taro counterpart Barrie Leavitt, claiming that the proposed sale is not legally valid.

In particular, Sun, which is still Taro’s largest shareholder, says that “the agreement in principle with this particular buyer significantly undervalues the entire facility, even if one were to take into account only the existing asset base and ignore any future growth potential". Mr Shanghvi adds that the Roscrea plant “has the potential to produce substantial revenues..in the future and any sale now is premature”.

He added that given the number of injectable products which have been approved, or are in process for approval, by the Irish authorities, “and the access this provides to Europe, we believe that the Irish facility is of strategic importance to Taro”. Sun is also questioning how the proposed sale is being handled.

Mr Shanghvi says that Taro “has provided no evidence of a transparent sale process”. He adds that “given the undervaluation, and the fact that the identified buyer is personally close to senior Taro officials, we have doubts about the nature of this transaction”. Furthermore, he says that this close relationship between management and the proposed buyer “is especially troubling, given Taro’s repeated refusal” to consider Sun as a potential buyer “on the grounds that we were a ‘related party’.”

He concludes by saying that Sun, as Taro’s potential owner, “will scrutinise the transaction process and the terms of any such proposed transaction and will hold directors of Taro liable for any breach of fiduciary or other duties that may arise”.