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midastouch017

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midastouch017

Re: midastouch017 post# 593

Thursday, 12/14/2006 11:14:37 AM

Thursday, December 14, 2006 11:14:37 AM

Post# of 1367
Wed: Wait and see on Taro
New management could fulfill Taro’s potential, but we’re not there yet.
Shlomo Greenberg
Last week, Shannon Zimmerman and Chuck Saletta, two serious writers for the The Motley Fool, wrote about Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) and both of them recommended it as a stock with serious economic value.
Saletta’s article is interesting because of the innovative approach to the valuation of companies that are worth buying. Saletta claims that it’s worth buying shares of companies with a big market in the US and which have demonstrated global success. The companies he lists are, in order of size, British Petroleum Plc (NYSE: BP: LSE: BP), Nokia Corp. (NYSE: NOK), Canon Inc. (NYSE: CAJ; TSE: 7751), SAP AG (NYSE: SAP), Teva, and Tata Motors Ltd. (NYSE: TTM).

Taro: Waiting for the changing of the guard

Taro Pharmaceutical Industries (Nasdaq: TARO) 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 also been encouraged to make a bid by Merrill Lynch. I asked myself who are these unusual people that are rushing to buy this stock, with the present company management, just because of rumors which claim that a new management team is about to step in?. Merrill Lynch has been making efforts to find a replacement for Taro’s current management, in order to extricate many investors from the quagmire they 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. (Nasdaq: 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 that we saw last week was doomed to failure from the outset.

The Levitt family has been sitting in Taro a lot longer than Simcha Fass was at Savient, and it has not excelled in giving shareholders satisfaction (to put it mildly). Did anyone really believe that the company would meet the listing requirements of the Nasdaq Listing Qualification Panel? Although the committee could reconsider its decision, I find it difficult to believe that it will actually 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 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.

Published by Globes [online], Israel business news - www.globes.co.il - on December 13, 2006

http://www.globes.co.il/serveen/globes/docview.asp?did=1000162373&fid=1052
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