Sun to acquire shares of Taro Pharmaceuticals

On May 18, 2007, Taro and Sun Pharma’s subsidiaries entered into a merger agreement whereby Sun Pharma’s subsidiary would acquire Taro, which the Taro board of directors unanimously approved. At that time, Taro was in a financial crisis and Sun Pharma agreed to invest nearly $60 million in cash to save Taro from bankruptcy.

In the event the merger was not consummated, Taro’s controlling shareholders, led by Taro’s chairman, Barrie Levitt, granted Sun Pharma an option to acquire all their shares, including all of the founders’s shares of Taro.

Taro purported to terminate the merger agreement on May 28, 2008. Pursuant to the option agreement, Sun Pharma may exercise its options within 30 days after termination of the merger agreement.

Although Sun Pharma believes that Taro’s purported termination of the merger agreement was improper, it has exercised the options to preserve its rights under the option agreement and states that the exercise of the options shall not in any way be construed to be an acceptance or recognition of the purported termination of the merger agreement.

In connection with the exercise of the options, Sun Pharma will in the next few days commence a tender offer for all ordinary shares as required by the option agreement. The option agreement also requires that Sun Pharma specifically commence its tender offer at $7.75 per share.