Sun Pharma gives up Taro merger plan

Sun had wanted to delist the Israeli drug unit

Sun Pharmaceutical has given up its efforts to acquire full control of its Israeli drug unit Taro.

On Friday, the Mumbai-based company and Taro mutually agreed to terminate their merger agreement, which was announced in August 2012. Sun Pharma, which holds 66.5 per cent stake in Taro, had wanted to make it a wholly owned subsidiary.

Sun had signed the deal to buy Taro for $454 million in May 2007. At least two shareholders of Taro — Raging Capital and Grand Slam — had objected to the deal value, despite revisions. According to the latest offer given by Sun, shareholders of Taro (other than Sun Pharma and its affiliates) would have received for a Taro share cash payment of $39.50, upon the close of the merger deal. In an interview with Business Standard, Mitch Sacks, chief investment officer at Grand Slam, had said $110 a share was the ideal price Sun can offer for each Taro share.

Taro shares are now traded at $50.5 on the NYSE, about 28 per cent higher than Sun’s current offer of $39.5. Sun Pharma ended the day at Rs 744.05, losing 0.63 per cent from yesterday’s close, on BSE.

Ranjit Kapadia of Centrum Broking said: “Sun, which was planning to make Taro a wholly-owned subsidiary, will have to share 33 per cent profit with other minority shareholders, which seems to be a tough decision as Taro performs pretty well today.”

Taro recently posted Q3 FY13 sales of $186 million, up 25 per cent from the year-ago period, and a net profit of $89 million. For the first nine months, sales were $506 million.