Taro demands $15/share for merger with Sun

Israeli drug major Taro Pharmaceutical, which is battling a hostile takeover bid, has demanded a 58 per cent premium, or $15 per share, in cash to effect a merger with Sun Pharmaceutical Industries. However, Sun Pharma rejected the offer citing it was beyond the worth of Taro, which did not disclose audited results for three years and restated accounts.

With the Israeli Supreme Court’s directive to find an out-of-court settlement option ending today, the court is likely to decide the fate of Sun Pharma’s attempts to acquire the remaining 64 per cent stake of promoters and other shareholders in Taro.

“We believe that a merger price at this level would have a reasonable prospect of obtaining a favourable shareholder vote, and our board would be prepared to support it,” Barrie Levitt, chairman of Taro, said in a late night communication to Dilip Sanghvi, chairman and managing director of Sun Pharma.

Sun Pharma also said it has extended its tender offer till January 30, 2008. The offer, which was extended earlier based on court directive, was set to expire today. Sun also informed the Supreme Court of Israel that although it has been engaging in discussions to resolve the dispute, those negotiations have been unsuccessful and was awaiting the decision of the Supreme Court.

He said Taro was interested in pursuing discussions of a merger at this price ($15 a share) and would be prepared to join in seeking a short extension of the 30-day discussion period set by the Israeli Supreme Court.

In his reply, Sanghvi said, “Your letter of yesterday, sent at the 29th day of the negotiation period, proposing a merger at an 82 per cent premium to market, is clearly just another unfortunate attempt to justify a request to delay a ruling by the court.”

Earlier, Sun had offered a maximum of $9.50 per share with two options, based on the court directive.

Sun had refused Taro’s suggestion to conduct a shareholder referendum on a merger at a price of Sun’s choosing, above its earlier proposal. Sanghvi said under the option proposed by Taro, if the merger gets rejected, then the promoter Levitt and Moros family could keep their shares.

Taro and its outside directors were working to protect the interests of the company’s promoters. The new offer was aimed to eliminate the earlier Option Agreement that gave Sun Pharma rights to attach the shares of promoters in the event of a failed merger, Sanghvi added.

Levitt maintained that Sun’s proposal of $9.50 per share woefully undervalued Taro. Sun Pharma had paid $10.25 per share to acquire Brandes Investment’s shares last year. Further, Templeton, which holds nearly enough shares to block a merger all by itself, maintained it would not support a merger at this level, he said.

In May 2007, Franklin Advisers and Templeton, which holds about 9 per cent of Taro’s shares, had filed a motion in Tel-Aviv District Court against the merger citing protection of minority interests. However, the court ruled in favour of Sun Pharma.