Hiking the offer price will not be in ‘in the best interest of shareholders’

Sun Pharma, on Friday, called off a nearly $600 million plan (over Rs.3,100 crore) to acquire outstanding shares of Israel’s Taro Pharmaceutical, citing pricing issues.

The domestic pharma major also said hiking the offer price — to acquire remaining stake in Taro — would not be in “in the best interest of shareholders.’’

The unexpected development negates Sun Pharma’s efforts to fully acquire Taro Pharmaceutical, which had agreed to the deal in August, 2012, after nearly five years of bitter legal battle.

Sun Pharma’s latest buyout offer of $39.50 a share for 15 million scrips was 61 per cent higher than its previous offer of $24.50 — which was rejected by Taro. Taro’s shares closed on Thursday at $50.55.

In a statement, Sun Pharma said “they have mutually agreed to terminate their merger agreement.’’

“Sun Pharma has been considering the reaction of Taro shareholders to the proposed buyout and concluded that Taro’s shareholders would be unwilling to approve the merger unless price was increased substantially.

“... and Sun Pharma decided it would not be in its shareholders’ interest to do so,” Sun Pharma Managing Director Dilip Shanghvi said in a conference call. At present, Sun Pharma has 66.5 per cent stake in Taro.

“Each of Sun Pharma and Taro (at the direction of the Special Committee) agreed that terminating the merger agreement was in the best interest of the respective companies and shareholders,” the statement said.

Sun Pharma had acquired a controlling stake in Taro in September, 2010, after nearly four years of legal wrangling.

The proposed merger agreement provided that all shareholders of Taro other than Sun Pharma and its affiliates would receive a cash payment of $39.50 a share upon deal closure.

Subsequently, Taro would have become a privately held company.

In July last, Taro’s board had rejected Sun Pharma’s offer to purchase all the outstanding shares of the Israeli firm that would have entailed an outgo of $367.5 million (over Rs.1,810 crore). This was after the special committee of Taro’s board said the offer price was inadequate.

In November, 2012, Taro had postponed a meeting of shareholders to consider the company’s proposed merger with Sun Pharma.

Shares of Sun Pharma, on Friday, closed at Rs.744.05 on the BSE, down 0.63 per cent from its previous close.

Profit up

The company has reported a 31.9 per cent rise in its consolidated net profit at Rs.881.30 crore for the third quarter ended December 31, 2012, primarily on the back of strong sales in the U.S. market, against Rs.668.30 crore in the corresponding period of the previous fiscal, the company said in a statement.

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