Sun Pharma to delist troubled US subsidiary

To acquire the remaining 24% shares for over Rs 214 cr.

Drug major, Sun Pharmaceutical Industries, is set to delist its troubled US-based subsidiary Caraco Pharmaceutical from the US bourses.

The company, which holds about 76 per cent stake in Caraco, announced today it would acquire the remaining Caraco shares at $4.75 per share in cash, a five per cent premium over the most recent closing price. According to Bloomberg data, Caraco has 39.635 million outstanding shares. The deal will cost Sun Pharma approximately $45.18 million (Rs 214 crore). It did not disclose the deal size.

In a letter to the board of directors of Caraco, Sun Pharma Chairman Dilip Shanghvi said his company was proposing a private transaction under which Sun, Sun Global and one or more of their affiliates would acquire all the outstanding shares of Caraco Pharmaceutical Laboratories. “Our proposal presents valuable opportunities for our companies to build upon our existing commercial partnership and to realise the significant incremental benefits that will accrue from a full combination of our businesses,” he said.

He said Caraco’s board of directors had authorised the independent committee to evaluate the delisting proposal.

Sun had acquired Caraco in 1998 when it was a loss-making company and turned it around in a few years. Caraco, started in 1984, is a publicly listed generic pharmaceutical company traded on the New York Stock Exchange.

In June last year, the US regulators seized about 33 drugs and raw materials at three plants of Caraco in the US, citing deviation from current good manufacturing practices (cGMP). Since then, the Detroit-based company was not allowed to run these three sites. The company is yet to comply with the manufacturing norms and get green signal from the Food and Drug Administration (FDA) to restart production.

Recently, Sun Pharma acquired Israel-based Taro Pharmaceutical after a bitter three-year hostile takeover battle in Israel and US courts. It also acquired the minority shareholding of asset management firm Templeton.

Sun Pharma said its proposal was not subject to any financing condition but to the approval of Caraco board and other regulatory agencies.