UPDATE 1-Watson co-founder Chao steps down from board

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NEW YORK, May 12 (Reuters) - Watson Pharmaceuticals Inc's (WPI.N: Quote, Profile, Research, Stock Buzz) co-founder and Chairman Allen Chao has resigned from the board of directors, effective immediately, to pursue other business activities, the company said on Monday.

Watson, one of the largest U.S. manufacturers of generic drugs, said board member Andrew Turner would become nonexecutive chairman.

Chao was a co-founder of Watson in 1983, and served as its chief executive for 22 years.

The company in August named Paul Bisaro, then the chief operating officer at rival Barr Pharmaceuticals Inc (BRL.N: Quote, Profile, Research, Stock Buzz), to succeed Chao. At the time, Watson said in a securities filing that Chao would serve as a board member until the company's 2010 shareholder meeting.

But Chao told Watson after its annual stockholder meeting on Friday of his decision to resign, the company said.

"I know I will continue to call on Allen for advice and counsel as Watson continues on the path of success he began 25 years ago," Bisaro said in a statement. "We thank him for his leadership and wish him well in his future endeavors." (Reporting by Lewis Krauskopf, editing by Maureen Bavdek)