US-based firm Taro's shareholders approve merger with Sun Pharmaceutical

Seventeen years after Sun Pharmaceutical Industries signed an agreement to acquire Taro in 2007 in a $454 million deal, shareholders of US-based Taro approved the merger agreement between the two companies on Thursday.

Upon completion of the merger, currently expected to close in approximately 35 days (subject to the satisfaction or waiver of certain closing conditions), Taro will become a privately held company wholly owned by Sun Pharma, and soon after, its shares will be delisted from the NYSE.

The merger agreement between Sun Pharma and Taro was approved by an affirmative vote of Taro shareholders at an extraordinary general meeting and an ordinary class meeting on May 22. The details of the merger agreement were announced on January 17, 2024.

Dilip Shanghvi, managing director of Sun Pharma, said, “We are pleased with the approval by Taro’s shareholders, which, subject to the remaining closing conditions, will enable Taro to merge with Sun. The combined entity will enable us to better serve the needs of patients, healthcare professionals, and our customers around the world.”

Analysts felt this would allow Sun to make better use of Taro's $1.3 billion cash.

Uday Baldota, chief executive officer of Taro, said, “Throughout our fifteen-year relationship with Sun Pharma, Taro has benefited from their global scale and resources. This merger will further enable us to compete effectively in our products and markets.”

In 2007, Sun Pharma had signed an agreement to acquire Taro 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.

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

This transaction was expected to be completed by 2024-25.

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 a reverse triangular merger. 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 in January.