BlueMountain Capital Management, LLC Urges Minority Shareholders of Taro Pharmaceutical Industries Ltd. to Vote FOR BlueMountain’s Independent External Nominees to the Board of Taro and AGAINST the Re-Election of Incumbent External Directors and All Interested-Party Proposals Involving Executive and

March 20, 2014

Updates Fellow Minority Shareholders on Developments in Ongoing Litigation with Taro

NEW YORK, March 20, 2014 /PRNewswire/ — As a result of material flaws in the voting process in Taro Pharmaceutical Industries Ltd’s (“Taro” or the “Company,” NYSE:TARO) annual general meeting held on September 12, 2013 (the “General Meeting“), Taro has called an extraordinary meeting of its shareholders (the “Extraordinary Meeting“) to ratify each of the following resolutions (originally voted upon at the General Meeting): (i) the election of external directors, (ii) the approval of Taro’s compensation policy, and (iii) the approval of compensation to three of its officers and directors (Dilip Shanghvi, Sudhir Valia and Kal Sundaram). BlueMountain Capital Management, LLC (BlueMountain) repeatedly notified Taro of these flaws prior to and during the General Meeting, but Taro failed to remedy those flaws.

The Extraordinary Meeting has been called by Taro following a lawsuit filed on November 19, 2013 in the Israeli District Court against Taro by BlueMountain (including several of its investment funds) and IsZo Capital LP (“IsZo“), two of the largest minority shareholders of the Company. In the lawsuit, BlueMountain and IsZo seek to vacate most of the resolutions which were voted upon at the General Meeting. These same resolutions are now being presented for ratification at the Extraordinary Meeting.

BlueMountain urges shareholders to exercise their voting rights in order to protect their interests as minority shareholders. BlueMountain intends to vote, and recommends that its fellow minority shareholders vote:

    --  "AGAINST" the re-election of Taro's nominees, Ilana Avidov Mor and Dan
        Biran, as external directors (Proposals #5(a) and #5(b));
    --  "FOR" the election of BlueMountain's nominees, Ben-Ami Rosenfeld and Adi
        Bershadsky, as external directors (Proposals #6(a) and #6(b));
    --  "AGAINST" the approval of Taro's Executive Compensation Policy (Proposal
    --  "AGAINST" the approval of the remuneration of Dilip Shanghvi (Proposal
    --  "AGAINST" the approval of the remuneration of Sudhir Valia (Proposal
        #3); and
    --  "AGAINST" the approval of the remuneration of Subramanian
        Kalyanasundaram (Proposal #4).

Independent proxy voting advisory firms, Institutional Shareholder Services (“ISS“) and Glass, Lewis & Co. (“Glass Lewis“), both recommend that shareholders of Taro vote “FOR” the BlueMountain nominees in Proposals 6(a) and 6(b) and “AGAINST” Taro’s nominees in Items 5(a) and 5(b) at the Extraordinary Meeting. ISS and Glass Lewis also recommend that Taro shareholders vote “AGAINST” the approval and ratification of Taro’s director and executive compensation proposals (Proposals 2, 3, and 4).

An example of how BlueMountain intends to complete its proxies can be accessed at http://www.bluemountaincapital.com/taro/VIF_March2014.pdf. Shareholders needing assistance in voting their proxy card and shareholders who have not yet received a proxy card may call Innisfree M&A Incorporated, toll-free at (888) 750-5834 (institutions, banks, and brokers may call collect at (212) 750-5833). Shareholders are urged to vote before 11:59 p.m. Eastern Time on Monday, March 24, 2014.

Beginning in August 2012 with the announcement of the Taro board’s approval of a merger with a subsidiary of Sun Pharmaceutical Industries Ltd (“Sun“), the consummation of which would result in all minority shareholders transferring their shares to Sun’s subsidiary at a clearly inadequate price of $39.50 per share, BlueMountain and other minority shareholders have sought to protect minority shareholder interests. That offer, when compared to the current price of approximately $120 per share, would have unambiguously transferred significant value from Taro’s minority shareholders to its controlling shareholder Sun. In July 2013, BlueMountain initiated the current effort to nominate two external directors to the board of Taro, per our rights as minority shareholders under Israeli law. The term of an external director in Israel is three years. Thus, the 2013 General Meeting represented a unique opportunity to ensure that Taro’s board would have independent directors nominated and voted into office by the minority shareholders.

Since that time, Taro has made no effort to engage or discuss the concerns of minority shareholders as regards enhancing corporate governance. To the contrary, we believe that Taro’s actions reflect a strategy designed to thwart the ability of minority shareholders, exercising their legal rights, to improve corporate governance at Taro. As a result we have been forced to pursue legal action against Taro to ensure that the rights of minority shareholders are respected.

Update on Litigation with Taro

On January 31, 2014 BlueMountain and IsZo issued a joint press release updating fellow minority shareholders on the status of their lawsuit against Taro. In that press release, among other things, we disclosed the minutes of the General Meeting and the voting results. These results showed that the margin of victory among disinterested shareholders for the incumbent external directors was small at approximately 1.5 million shares. Notably, the incumbent directors received approximately 5.7 million votes for their re-election and approximately 4.2 million votes against their re-election.

Similarly, our candidates, Ben-Ami Rosenfeld and Adi Bershadsky, failed to receive a majority of minority shareholder votes cast by a margin of fewer than 1 million shares. They received approximately 4.4 million votes for their election and approximately 5.4 million disinterested shareholders’ votes against.

As a result of an order issued at our request by the court, we received from Taro the detailed voting results of the General Meeting. Upon further scrutiny, we have serious concerns about the manner in which a large block of shares held at Brown Brothers Harriman (“BBH“) were voted in the election. We have sent a letter, accessible at http://www.bluemountaincapital.com/taro/ExhibitA_March2014.pdf, to Taro’s board demanding that they investigate this matter immediately, and have updated the judge presiding over the case.

In summary, as is reflected in the voting information delivered to BlueMountain and IsZo, 13,856,201 shares held at BBH were voted at the General Meeting. To the best of our knowledge 9,938,295 of these shares are owned by Sun or its affiliates. The remaining 3,917,906 shares were voted as disinterested shares (i.e. shares having no personal interest in the resolutions). All 3,917,906 shares were voted in accordance with Taro’s recommendation on every item of the agenda. These 3,917,906 shares – held at the same custodian as Sun’s 9.9 million shares – represent approximately 70% of the 5.7 million shares that were deemed to be disinterested that voted for the incumbents’ re-election and more than 25% of all outstanding minority shares at that time.

Given that: (i) Taro has called the Extraordinary Meeting following its implicit admission that there may have been irregularities around disclosure of personal interest, (ii) these 3,917,906 shares are held at the same custodian that Sun and its affiliates hold a large portion of their shares, (iii) every single share voted with Sun (and against the recommendations made by BlueMountain), and (iv) this was the decisive block of shares in determining the outcome of the various proposals, we believe there is ample reason to question whether such shares were in fact disinterested and the manner in which they were voted.

Importantly, under Israeli law, any person who votes in the Extraordinary Meeting on behalf of another shareholder (the “Proxy“) is required to disclose to Taro the existence or the lack of any “personal interest” (as such term is defined under Israeli law) that such Proxy, as well as any personal interest that the shareholder on behalf of whom the Proxy is acting, may have in the resolutions being voted upon.

Accordingly, if a broker or any other Proxy who votes on behalf of a shareholder (whether using its own discretion or based on ongoing or specific voting instructions) has a personal interest in any resolution (even if the shareholder for whom the vote is performed by the Proxy has no such personal interest in the resolutions), then such broker or other Proxy is required by Israeli law to disclose the existence of that interest to Taro, and such vote must be treated as that of an interested shareholder. This means that prior to placing a vote, any such broker or any other Proxy is also legally required to verify with the shareholder for whom it is acting that such shareholder has no personal interest.

Under Israeli law, a broker or Proxy would have such a personal interest if it had any material ongoing financial, commercial or business ties with Taro or Sun. In such case, the votes of such shareholder must be classified as having a personal interest. We believe the fact that BBH holds approximately 9.9 million shares for Sun may be deemed to constitute a material ongoing relationship with Sun and therefore, if the additional 3,917,906 shares held at BBH were voted by BBH, such shares should also be considered “interested.”

We reiterate to fellow minority shareholders that, by virtue of the reduction of the number of minority shares outstanding after the September 2013 vote, as well as the enhanced scrutiny on the voting process as a result of our lawsuit, your vote has never been more valuable and impactful.

Separately, on January 31, 2014, representatives of Taro sought to have the lawsuit filed by BlueMountain and IsZo dismissed in Israeli court. The court declined to dismiss the lawsuit and in fact granted BlueMountain and IsZo the right to amend our complaint after the March 27, 2014 vote (if required). While Taro has addressed some of our procedural concerns with respect to the voting documents, others have not been remedied – notably, the voting cards and the voting instruction forms (“VIFs“) state that non-indication of voting instructions shall be deemed to be a vote “for” the resolutions recommended by the board (a recommendation which, to the best of our understanding of Israeli law, should not have been included on the voting cards and VIFs). The voting cards and VIFs also state that if a shareholder fails to indicate whether he or she has or does not have a personal interest in the vote, he or she will be deemed as not having a personal interest.

Voting “AGAINST” the re-election of Ilana Avidov Mor and Dan Biran

External directors play a critical role in representing the interests of minority shareholders and providing a measure of independence at companies like Taro where a controlling shareholder holds the majority of the share capital. BlueMountain believes that Taro’s current external directors, Dan Biran and Ilana Avidov Mor, have failed to adequately represent the interests of minority shareholders and there is a clear need for new and improved independence and oversight on Taro’s board.

BlueMountain believes that minority protections provided by Israeli law played a pivotal role in thwarting the offer by Sun to acquire, by means of merger, the minority shareholder interest in August 2012 for $39.50 per share (the “Acquisition). The $39.50 per share price that Taro’s board accepted from Sun in August 2012 grossly undervalued Taro. It was in fact below the closing price of $40.97 on the day prior to the announcement of the offer, provided a premium of only approximately 1.9% on Taro’s average stock price over the preceding month and is approximately 64% lower than the average closing price in February 2014.

In their capacity as external directors (having served as such since December 2010), Ilana Avidov Mor and Dan Biran supported the Acquisition and approved it. Had the Acquisition succeeded, tremendous value would have shifted from minority shareholders to Taro’s controlling shareholder Sun. BlueMountain believes that Ilana Avidov Mor and Dan Biran failed to demonstrate the independence or skill necessary to properly assess the Acquisition on behalf of minority shareholders.

In July 2013, Taro nominated these same external directors who failed to protect the interests of the minority shareholders to a new three year term. It supported their re-election through a flawed process, in which voting was conducted using defective voting cards and instruction forms and shareholders were not required to disclose the existence or non-existence of a “personal interest” when voting for certain proposals, as required by Israeli law. Despite our numerous public and private communications with Taro’s board, including Ilana Avidov Mor and Dan Biran, the board members inexplicably failed to remedy these flaws prior to the 2013 General Meeting. Their actions demonstrate a disturbing disregard for the interests of minority shareholders and the requirements of Israeli law.

Therefore, BlueMountain believes that it is more important than ever to replace Dan Biran and Ilana Avidov Mor with external directors who are willing and capable of ensuring that Taro act in the best interests of all shareholders.

The re-election of Taro’s external directors requires a majority of votes cast by shareholders who are neither controlling shareholders nor shareholders who have a “personal interest” in such vote. Thus, if a majority of the minority shareholders (who actually vote at the Extraordinary Meeting) vote “AGAINST” the re-election of Dan Biran and Ilana Avidov Mor (Proposals 5(a) and 5(b)), their re-election will be blocked.

Voting “FOR” the election of Ben-Ami Rosenfeld and Adi Bershadsky

BlueMountain is confident that its nominees, Ben-Ami Rosenfeld and Adi Bershadsky can provide the industry, operational, strategic and financial experience needed at Taro. We are equally confident that they have the independent fortitude to represent the interests of all shareholders. The biographies below describe the skills, attributes and experience that led BlueMountain to nominate these individuals.

Mr. Ben-Ami Rosenfeld has served, since 2011, as the chairman of the board of directors of DATA Detection Technologies Ltd., as well as a consultant and chairman of industrialization committee of Pluristem Therapeutics Inc. (listed on NASDAQ and Tel Aviv Stock Exchange). Prior to joining the board of DATA Detection Technologies Ltd., Mr. Rosenfeld served in a number of key positions in the pharmaceutical industry in Israel and abroad, including serving as the Chief Operating Officer and Executive Vice President of Teva Pharmaceutical Industries Ltd. from 1985 to 1996. Prior to that time, from 1979 to 1985, he served as the General Manager of subsidiaries of Schering Plough USA in Europe and Africa. Mr. Rosenfeld has declared that in addition to having the professional qualifications required to serve an external director, he possess accounting and financial expertise.

Ms. Adi Bershadsky has served as a Business Development and International Marketing Director at mPrest Systems (2003) Ltd., an affiliate of RAFAEL Advanced Defense Systems Ltd., since August 2012. She has also served as an external director of Israel Television News Company Ltd. (“Chanel 2″) since 2011 and as an external director of Jobokit Holdings Ltd. since 2006. Ms. Bershadsky retired from the Israeli Air Force in 2003, having been the first woman to achieve the rank of Colonel in the Israeli Air Force. She has previously served as the Israel Defense Forces’ Attaché and Head of the Ministry of Defense Delegation in Poland, the Czech Republic, Slovakia and Hungary. Ms. Bershadsky has declared that in addition to having the professional qualifications required to serve as an external director, she possess accounting and financial expertise.

BlueMountain recommends that shareholders vote “FOR” the election of Ben-Ami Rosenfeld and Adi Bershadsky as external directors (Proposals #6(a) and #6(b)).

Voting “AGAINST” the other resolutions on the Agenda of the General Meeting

BlueMountain intends to vote “AGAINST”, and recommends that the other minority shareholders vote “AGAINST”, all other proposals included on the agenda for the same reasons explained by it in its press release dated August 26, 2013.

Media Contacts:

Doug Hesney / Sam Kerbel

Dukas Public Relations


doug@dukaspr.com / sam@dukaspr.com

SOURCE BlueMountain Capital Management, LLC

Source: PR Newswire

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