NIS 79 million suit against Teva: Paca Industries alleges false representations - TheStreet

Paca Industries today filed a giant NIS 79 million lawsuit at the Tel Aviv Magistrates Court against Teva Pharmaceuticals (Nasdaq:TEVA), its subsidiary Teva Properties, its former executives Aharon Agmon and Dov Shaham, as well as against Ron Beeri and his company Beeri Capital.

Paca Industries, Teva's yeast and alcohol fermentation business, claims in the suit filed by lawyers Benjamin Levinbok, Yair Leibovich and Sharon Lubetsky, that in the past it was a wholly owned subsidiary of the TASE traded Shemen Industries, and that in 1998 it purchased from Teva Properties, formerly named Paca Industries, all of its yeast production assets.

Paca claims further it has discovered that back in 1998 the defendants ¿ Teva, Teva Properties, Agmon and Shaham ¿ made false representations to the plaintiffs, which were misleading, and concealed information, and which led Paca to sign an agreement according to which Paca bought the yeast manufacturing equipment for $14.5 million.

"After signing the agreement," says Paca, "the events that occurred and the facts that became evident eroded the plant's profits, taking it from a factory seemingly profitable to a point in which it was losing massive amounts every month, so much that its future existence was at risk."

According to the plaintiff, there was no competition in the yeast fermentation sector in Israel before the agreement was signed. Soon afterwards, however, competing imports started coming into the country, wearing the company's product prices down and eating into its revenues, taking the company to the brink of destruction.

For a while, says the plaintiff, it regarded the advent of competition as mere "bad luck". However, it soon discovered it had been misled and that prior to the sale the defendants had concealed relevant information.

The information included, among other things, unequivocal announcements from Lasaffr, the world's largest yeast corporation, of its immediate intent to enter the Israeli yeast market in such a fashion that would end Paca's activity in the country.

"Not only did the defendants not reveal this basic, significant information, they went so far as to provide us with outright false presentations so as to entrap the company," claims the plaintiff.

The plaintiff directs most of the blame at the former manager of Teva Properties, Dov Shaham, who continued to act as CEO of the plaintiff for a long period of time after its sale.

The plaintiff claims that years after the agreement was signed, several documents left behind by Shaham who was no longer CEO for the plaintiff, were found in a factory locker. The documents revealed the defendants joined forces in their conspiracy to sell the plaintiff a property that they knew would soon lose all its value.

The plaintiff claims the documents reveal that the defendants not only knew of Lasaffre's intent to enter the Israeli market, but that it had also tried to push off its threats, start legal action against it, and at one point it even considered selling its plant to Lasaffr.

Other documents were found, says the plaintiff, that internal valuations of Teva predicted a 70% devaluation of the company in case of imported competition.

The plaintiff proves how much it has devaluated by indicating the low $100 price its owner, Shemen Industries, got for a 50% in it in the end of the year 2000. The defendants have not yet filed their response.