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Sun Pharma to acquire remaining stake in Israeli firm Taro for Rs 2,892 cr

Merger would pave the way for Sun to consolidate its position in the US market, say analysts

Sun Pharma

“With the consummation of the transaction, the combined entity will be in a position to leverage Sun Pharma’s global strength and capabilities that shall pave way to better serve the needs of patients and healthcare professionals,” said the company i

Sohini Das Mumbai

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Sun Pharmaceutical Industries has entered into an agreement with Taro Pharmaceutical to acquire the balance 21.52 per cent stake in the Israel-based company for a cash consideration of $43 / share, amounting to $347.73 million (Rs 2,892 crore).

Sun already owns a controlling stake of 78.48 per cent in the company. This transaction is expected to be completed by 2024-25.

Post acquisition, Taro will become a privately-held company and its shares will be delisted from the New York Stock Exchange. Its shares ended the trading session at $41.28 apiece on Wednesday. 

“The transaction is subject to approvals of the shareholders of Taro, including most of its minority shareholders participating in the vote, and subject to other requisite statutory approvals, according to the applicable laws,” said Sun in a regulatory filing on Thursday.

Sun Pharma’s shares were trading at Rs 1,314.95 a piece on BSE in morning trade.

“This was long due and the merger would pave the way for consolidating its positioning in the US/rest of the world (RoW) markets. Also, this would allow Sun to make better use of Taro's $1.3-billion cash. The transaction is at a 4 per cent premium to the last traded price,” said Aashita Jain - Assistant Vice President - Equity Research, Nuvama Institutional Equities..

Sun Pharma had signed an agreement to acquire Taro in 2007 in a $454 million deal, but in 2008, Taro had unilaterally terminated the deal, which Sun Pharma challenged in the Supreme Court of New York.

In September 2010, Sun Pharma acquired a controlling stake of 48.7 per cent in Taro. In 2012, Sun Pharma proposed to buy Taro shares for $39.5 per share. Sun continued to pick up stake in Taro over the years, taking its shareholding to 78.48 per cent.

Dilip Shanghvi, managing director of Sun Pharma, said, “Over the years, with Sun Pharma’s strategic interventions, Taro has remained a key player in the generic dermatology market in a challenging environment. After completion of the merger, the combined entity will firmly move forward, leveraging its global strengths and capabilities to better serve the needs of patients and healthcare professionals.”
 
Uday Baldota, chief executive officer (CEO) of Taro, said, “Taro is committed to delivering high quality products to our patients and customers around the world. This merger will further enable us to compete effectively in our products and markets.”

Sun, in May 2023, had announced a non-binding indication of interest to acquire all outstanding ordinary shares of Taro. It was for a purchase price of $38 per share in cash through reverse triangular merger, said Nuvama analysts.

Thereafter, Sun was engaged in multiple rounds of price negotiations with a special committee of Taro’s board of directors regarding the proposal. Sun revised the purchase price upwards to $43 per share in December.

“The $43.00 per share purchase price represents a 48 per cent premium over the closing price of $28.97 per share on May 25, 2023, the last trading day before Sun Pharma first submitted its non-binding proposal to Taro. It is at a premium of 58 per cent to the volume-weighted average price of the shares during the 60 days prior to and including May 25. The purchase price also represents a 13 per cent increase over the initial proposed purchase price of $38.00 per share as proposed on May 26, 2023,” Sun Pharma said in a statement. 

Most of Taro’s business is in the US and Canada. The company’s consolidated revenue from operations in FY23 was $572.90 million (Rs 4,604.25 crore).

The special committee retained BofA Securities as its financial advisor, Goldfarb Gross Seligman & Co. as its Israeli counsel and Skadden, Arps, Slate, Meagher and Flom LLP as its US legal counsel, to assist it in its mandate.

Herzog, Fox & Neeman is acting as Israeli legal counsel to Sun Pharma and Davis Polk & Wardwell LLP is US legal counsel to Sun Pharma. Meitar is acting as Israeli legal counsel to Taro and Shearman & Sterling LLP is its US legal counsel.

 
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First Published: Jan 18 2024 | 11:38 AM IST

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