Ten years on, Sun Pharma revives plans to mop up all outstanding shares in Taro

Drugmaker Sun Pharmaceutical Industries has revived its proposal to acquire all outstanding shares in Israeli drugmaker Taro Pharmaceutical Industries, about 10 years after it had terminated similar plans.

In the latest proposal, Sun has offered $38 for an ordinary share, and if the transaction goes through as outlined, Sun expects to delist Taro from the NYSE, it said in a Saturday communique.

Sun Pharma holds about 78.48 per cent in Taro and industry sources told businessline they are expected to fork out about $300 million for the transaction.

In 2007, Sun had made a $454-million offer for Taro — a deal it sealed after the two companies fought a long, cross-country battle. Sun’s efforts to mop up all the outstanding shares ran into resistance from a section of minority shareholders. With about 66 per cent in Taro, Sun eventually abandoned a revised, sweetened proposal to mop-up all the remaining shares in 2013.

Also read: Sun Pharma posts net profit of ₹1,984 crore for Q4 FY23

Latest proposal

Outlining the latest proposal, a letter from Sun to the Taro board said it would be executed through a reverse triangular merger under the Israeli Companies Law, 1999. 

This involved the purchaser forming a wholly-owned subsidiary (SPV), which would  enter into a merger agreement with Taro, “with the SPV merging with and into Taro and Taro surviving the merger transaction.”

Taro would then become a wholly-owned subsidiary of the purchaser and be de-listed from NYSE, it added. “As this is a common practice in Israel, we believe that such transaction structure would benefit all stakeholders of Taro and may be performed in a swift and certain manner,” it said.

The purchase price for the shares would be $38 per ordinary share in cash, payable in full at the closing of the proposed transaction. The purchase represents a premium of 31.2 per cent over Taro’s closing price on May 25, 2023, a 41.5 per cent premium over Taro‘s average closing price in the last 60 days and a compelling liquidity opportunity for Taro’s shareholders, it added.

Sun said Taro’s board of directors had appointed an independent committee to evaluate the proposal. Final approval of the proposal would be subject to, among others, final approval of transaction terms by Sun Pharma’s management and board; approval of all the governing bodies, including shareholders of Taro, and applicable regulatory approvals, including from any relevant Anti-Trust Authorities, Sun said.

Sun Pharma posted gross sales of Rs  43,278 crore for the 12 months ended March 31, 2023, up 12.6 per cent over last year, and a net profit  at Rs 8,473 crore.   

Taro’s full year FY23 sales were $573 million, up about 2.1 per cent over the same period last year. Taro’s reported net profit for FY23 was $25.4 million, compared to $58.3 million. Taro’s fourth quarter sales stood at $147 million, up 2.3 per cent over last year, and net profit stood at about $6.9 million, lower by 74.7 per cent over the adjusted net profit of Q4 last year.

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