Sun's Taro buy faces fresh block

Israeli drug company puts off shareholders' meet on merger to first quarter of 2008

Sun Pharmaceutical Industries' (SPIL's) efforts to acquire Israeli drug major Taro will be delayed with the latter deciding to postpone the crucial shareholder meeting to vote on the merger to the first quarter of 2008.

The previously stated timeline was before the end of November 2007.

Taro, which released its unaudited financial results for 2006 and for the nine months ended September 30, 2007 yesterday, had earlier postponed the meeting twice, citing reasons such as allowing shareholders additional time to fully consider the proposal and to make the financial results available to them.

So far Sun has bought $59 million worth of equity in Taro, including $41 million to help the cash-starved company avoid an impending payment default and another $18 million through the exercise of warrants.

Sun has not yet taken a decision on further infusion of capital into Taro, before the merger is completed, said Uday Baldota, Vice President of Sun Pharma.

"Our investment argument for Taro merger, articulated in May 2007, still holds," he said, while commenting on whether Sun would rethink the investment commitment in Taro, based on the latest financial results.

Sun Pharma announced its plans to acquire Taro in mid-May 2007 for $454 million (Rs 1789 crore), including equity purchase of approximately $230 million at $7.75 per share in cash.

Franklin Advisers and Templeton Asset Management (Templeton), which holds approximately 9 per cent of Taro's ordinary shares, approached the Tel Aviv District Court citing the deal was undervalued and the transaction allegedly oppressed minority shareholders' interests. The case is pending.

Taro said the losses mounted in 2006 mainly owing to efforts to reduce inventories with wholesalers, price erosion of its certain key products, delay in product introductions, previous legal and accounting expenses and certain non-cash impairment of assets, including the company's facility in Ireland.

For the nine months ended September 30, 2007, the company projected a better performance with an estimated net sales to about $232 million, with gross profit of approximately $126 million, and net income of approximately $14 million.

The company also has a total debt of approximately $224 million. Sun Pharma's shares closed on the Bombay Stock Exchange (BSE) today at Rs.1110.90 from the previous day close of Rs 1082.90, up by 2.59 per cent.

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Sun has made $59 million equity investments, including $41 million to help the cash-starved Taro avoid an impending payment default and another $18 million through the exercise of warrants

Sun Pharma announced its plans to acquire Taro in mid-May for a total value of $ 454 million, including equity purchase of $230 million at $7.75 per share in cash