Israel's Taro Pharmaceutical Industries has put its strategic Irish facility on the block, in a bid to fend off a merger with Sun Pharmaceuticals. Taro said it is selling the multipurpose pharmaceutical manufacturing and research facility in Roscrea, Ireland, to a group of Irish investors.

Taro, which had announced termination of the merger agreement with Sun after more than a year, stating the price of $10.25 per share was "insignificant," expects the asset sale to make a merger of Taro unappealing to Sun Pharmaceuticals.

This forced Sun Pharma's chairman and managing director Dilip Shangvi to shoot off a missive to Taro chairman and managing director accusing Taro of using all means to shake off Sun's plans to acquire Taro.

"Sun is determined to take actions if Taro pursues this sale that would strip Taro of assets that Sun would otherwise have had the opportunity to preserve and subsequently develop had the merger agreement not been wrongfully terminated," Shangvi warned in a letter addressed to Barrie Levitt, chairman and managing director of Taro.

Sun also questioned the valuation of the company as also the choice of the Irish buyer and the close relations of Taro's management with the proposed buyer.

Taro Ireland has been valued less than its real estate worth in the proposed sale agreement with the Irish buyers, the letter points out.

In our view, 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. If one were to add the potential revenue and profit from sales of products across Europe, the attractiveness of the entire Irish facility and operations increases multifold. Sun said.

The proposed consideration for Taro Ireland includes earn-out payments based on future profits of the operations over a long period of time. Such earn-out payments are contingent on the performance of the third party buyer and, if payable, are only received at some future time by Taro. To date, Taro has neither been able to reconcile the valuation nor provide evidence that this is the best offer available, it said.

Taro, Sun said, has also provided no evidence of a transparent sale process, given the undervaluation and proximity of the identified buyer and senior Taro officials.

Taro had been repeatedly refusing to consider Sun as a potential buyer of the Irish facility.

The sale is clearly aimed at thwarting the sale agreement with Sun and to aid Taro's purported termination of the agreement of merger with Sun Pharma affiliates Alkaloida Chemical Company Exclusive Group Ltd and Aditya Acquisition Company Ltd, the letter said.

A Taro press release, Sun said, goes on to add: ''Against the constraints of the merger agreement, the company plans to pursue all options available in order to enhance shareholder value, including… a sale of assets.''

The clear intimation is that Taro intends to pursue the sale of its Irish operations now that it purports to have unilaterally terminated the protections afforded to us under the merger agreement, Sun noted.

Sun said it is withholding consent to the sale of the Irish operations, as the agreement with the Irish buyers significantly undervalued the Irish operations, the Irish operations presented Sun with considerable strategic and synergistic value as part of its merger with Taro; and  the facility has the potential to produce substantial revenues for Taro in the future and any sale now is premature.

''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,'' the letter added.

We believe that it is only appropriate for Taro to educate all shareholders as to the process followed by Taro in soliciting and shortlisting the currently identified buyer for the Ireland facilities. We have several legitimate concerns with regard to this process and the real motives of Taro's board of directors in pursuing the sale it aid.