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Sun sweetens Taro deal, to fork out $600 m more to buy remaining shares

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Dilip Shanghvi, Chairman of Sun Pharmaceutical Industries
Dilip Shanghvi, Chairman of Sun Pharmaceutical Industries

Sun Pharmaceutical Industries has hiked its offer by nearly 60 per cent to mop up the remaining shares in Israeli generic-drugs maker Taro Pharmaceutical Industries Ltd.

Sun will fork out an additional $600 million (nearly Rs 3,325 crore) for the remaining equity, if the revised offer goes through, according to a company official.

Sun Pharma holds 66 per cent equity in Taro. It plans to de-list Taro from the New York Stock Exchange, if the revised offer succeeds.

The Mumbai-based Sun has entered into a “merger agreement” that all shareholders of Taro other than Sun Pharma and its affiliates will receive $39.50 per share upon the closing of the merger.

The development comes less than a month after Taro’s board had rejected the earlier proposal from Sun, where it had offered $24.50 a share.

With Taro’s financial performance looking up, a section of minority shareholders in Taro were unhappy with the original proposal from Sun.

Though Taro’s board has approved the latest revised proposal, Sun still needs shareholder approval, among other things.

Sun has a difficult task at hand, says a pharma analyst. Taro shares are trading at about $40.97, and minority shareholders may not agree to settle for any less, she points out.

However, Ranjit Kapadia, Centrum Broking’s Senior Vice-President, says that the revised price is 61 per cent higher than the first proposal, and it matches the present market-price.

So minority shareholders may bite into the sweetened deal, he observed.

It was in 2010 that Sun sealed its $454-million deal to acquire Taro, a good three years and several cross-country litigations after it had made its initial proposal to acquire in 2007. At present, Sun Pharma and its affiliates collectively own around 66 per cent of outstanding Taro ordinary shares and 100 per cent of Taro’s founder shares, representing 77.5 per cent of the outstanding voting power in Taro.

Upon completion of the merger, Taro will become a privately-held company, wholly-owned by affiliates of Sun Pharma and its ordinary shares will no longer be traded on the New York Stock Exchange, Sun said.

Sun shares were marginally up on the BSE, at Rs 682 on Monday.

jyothi@thehindu.co.in

(This article was published on August 13, 2012)
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