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Sun Pharma offers to buy remaining stake in Taro

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Sun Pharmaceutical, which had of four-and-a-half years ago, on Tuesday made a proposal to be the 100 per cent owner of the West Asian drug company. After about three years of legal battle, Mumbai-based Sun had in last September completed the acquisition of controlling stake in the Israeli firm. Today, Sun Pharma, the country’s largest drugmaker by market cap, owns 66 per cent in Taro.

Sun also said it offered to buy all of the outstanding shares it does not own in Taro — for $24.40 a share. Sun, which owns about 66 percent stake in the Israeli subsidiary, said its offer represents 25.96 per cent premium over the most recent closing of the Israeli firm's common stock. The announcement came after stock market hours in India.

It is now estimated that Sun Pharma would have to invest around $350 million to $370 million for around 15 million outstanding shares in Taro to become 100 per cent owners. Back in March 2007, Sun had signed a $454 million deal for a controlling stake in Taro, and along with its subsidiaries had subsequently increased its economic interest in the Israeli firm.

On Tuesday, in an announcement on the Bombay Stock Exchange (BSE), Sun said the company, together with its subsidiaries and affiliates, delivered a letter to its Israeli subsidiary, Taro, proposing to buy all its outstanding shares that it does not own. Sun made the offer to buy the outstanding shares at $24.5 in cash, representing a 25.96 per cent premium over the most recent closing price of Taro common stock.

The offer is subject to the approval of Taro Board and other regulatory authorities, Sun Pharma told BSE. The company share closed closed down 0.98 per cent to Rs 467.55 on the exchange on Tuesday. Taro shares jumped 23.1 percent to $23.95 at 8:55 pm.

Analysts said it was a positive development after such a prolonged litigation between the promoters and shareholders. Rajiv Dalal, who tracks pharmaceutical M&As at Ernst & Young, said Sun would be completing a full circle by owning 100 per cent in Taro. “It was a voluntary offer by Sun to step up its ownership in the Israeli firm, and that there were no regulatory hurdles in the way. When Sun acquired Taro, it was a straight forward deal, but it turned sour for other reasons,” he told Business Standard.

Another analyst, who did not want to be named, said, Taro had been a cause of concern for Sun Pharma for a long time because of large investments made without returns. “If Sun succeeds in getting 100 per cent control of Taro, it will be quite positive.” It would also “mean an end to the long tussle” between Sun and Taro promoters.

Sun’s top executives had last year said the company wanted to build on Taro’s market presence in the US, Israel and Canada and its expertise in dermatology, pediatrics, specialty and generic pharmaceuticals. Taro has a prominent presence in the dermatology and topical products segments in the US. Also, it’s a specialist in generic product offerings in cardiovascular, neuro-psychiatric and anti-inflammatory therapeutic categories.

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