Taro Pharmaceutical: A Changing of the Guard?

| About: Taro Pharmaceutical (TARO)

Taro Pharmaceutical Industries (TAROF.PK) gained last week on the back of rumors of attempts by the Ofer family fund to acquire the controlling interest, as well as talk that First Israel Mezzanine Investors Fund (FIMI) has been encouraged to make a bid by Merrill Lynch. I asked myself, who are these unusual people who are rushing to buy this stock, with the present company management, just because of rumors that claim a new management team is about to step in? Merrill Lynch has been trying to replace Taro’s current management in order to extricate from the quagmire many investors found themselves in after adopting its warm endorsements of the stock in previous years.

Both Merrill Lynch and the managements of other financial institutions that hold stocks in this company should have learned from what happened with Savient Pharmaceuticals Inc. (SVNTE), and acted accordingly. This was the only way to rehabilitate Taro for the benefit of its shareholders. What did they did do at Savient? They replaced the management that had been making a mockery of shareholders for 20 years. Since then, Savient has soared by more than 300%. You’ve seen what the rumors did to Taro, but the big difference is that Savient made its climb after the management had been replaced while Taro climbed before any such changes have been made. So the short surge we saw last week was doomed to failure from the outset.

The Levitt family has been sitting in Taro a lot longer Simcha Fass was at Savient, and it has not excelled at giving shareholders satisfaction (to put it mildly). Did anyone really believe the company would meet the listing requirements of the Nasdaq? Although the listing committee could reconsider its decision, I find it difficult to believe that it will do so. Let’s say that the auditors, Ernst &Young, had their work cut out for them at Taro right from the beginning, and with things as they are now, it really looks like they’re walking a tightrope.

I have been following ths company for more than 25 years, and for a moment, at the end of the 1990s, I believed Merrill Lynch and I thought that the veteran management team had seen the light. That, apparently, was not the case, and the only question that remains is how long it will take until the current management team is replaced. You can take my word for it that the day that happens, the party in the stock will be phenomenal, regardless of whether Taro is listed on Nasdaq or the Pink Sheets.

TAROF.PK 1-year chart:

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

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