In a recent shareholder activist letter, Templeton Asset Management announced its decision to vote its shares against a proposal to raise indemnification of directors and managers at Taro Pharmaceutical and against re-electing the management directors. The firm additionally called on Taro shareholders to withhold their support for the incumbent directors and managers and their indemnification and to require audited financial accounts from Taro. “The current board and management of the company have proven unwilling or unable to run the company in the interest of its shareholders,” stated executive chairman Mark Mobius. “In our view, they do not deserve the support of Taro’s shareholders.”
Templeton outlined the grounds for its lack of confidence in Taro and its management in a letter urging shareholders to take action. The firm cites Taro’s failure to provide audited financial statements for 2005-2008 and the first three quarters of 2009 as well as a credible or satisfactory reason behind the lack of disclosure. Taro was required in December of 2006 to de-list its shares from NASDAQ as a result of its failure to disclose the financial audit, and in the following years “shareholders are faced with severe liquidity and trading issues and are confronted with total lack of transparency,” the letter states.
Templeton further questions the reliability of data that Taro has released, which has not been audited and it often “misleading and wrong.” According to the letter, Taro frequently restates or revises financial data that had been previously presented to shareholders. The firm concludes that “it is absurd that Taro’s Chairman is attempting to obtain indemnification for board members (especially in light of the accounting and non-publication issues) without previously disclosing audited accounts.”
Templeton also questions the “departure of the CFO and other personnel, without ever receiving a full explanation of the company’s problems and difficulties,” which occurred shortly before the de-listing in 2006. Furthermore, despite Templeton’s recent requests, Taro continues to hold shareholder meetings concerning the audit without the actual presence of the auditor. The audit itself has become a severe financial drain, and Templeton states that “Taro management has spent $14.5 million of the company’s money for professional and consulting fees to work on the audit, without any results.”
“From our perspective as the second largest minority shareholder, Taro shareholders have undoubtedly fallen victim to Taro’s scandalous mismanagement,” the letter concludes. “We have no confidence left in the quality of the Board of Taro Pharmaceuticals in view of the failure to provide the most essential rights to shareholders.” |
