Sun Pharma buys outstanding stake in Taro for ₹2,891 cr

Shares of Sun Pharmaceutical Industries Ltd surged 1.44% to ₹1,314.80 early today, after the company announced the acquisition of all the outstanding shares of Taro Pharmaceutical Industries, marking conclusion to a 17-year legal battle.

The pharma giant, in an exchange filing, announced to acquire all outstanding shares of Taro Pharmaceutical Industries at $43 per share, amounting to $347.73 million, securing complete control over its subsidiary. Currently, it holds a 78.5% stake in Taro. It had proposed the purchase of the remaining 21.52% of the total outstanding shares of Taro at $38 per share in May.

The transaction marks the conclusion of nearly 17-year effort to gain full control of the U.S.-listed generic drugmaker, which primarily operates in the United States and Canada.

“The US$43.00 per share purchase price represents a 48% premium over the closing price of US$28.97 per share on May 25, 2023, the last trading day before Sun Pharma first submitted its non-binding proposal to Taro, and a premium of 58% to the volume-weighted average price of the shares during the 60 days prior to and including May 25, 2023. The purchase price also represents a 13% increase over the initial proposed purchase price of US$38.00 per share as proposed on May 26, 2023,” the pharma giant says.

Earlier, the pharma major had struck a deal to acquire the financially challenged Taro for a sum of $454 million. Additionally, Sun Pharma committed to infuse a prompt $45 million in interim equity financing to Taro, securing 7.5 million of the company's ordinary shares.

Nevertheless, in the ensuing period, Taro has consistently thwarted Sun Pharma's endeavours to finalise its rights to attain a controlling stake in the Israeli firm. A pivotal moment in the protracted battle occurred when the Israeli Supreme Court, in a unanimous decision, rejected Taro's appeal to prevent Sun Pharma from augmenting its ownership stake.

“The consolidated revenue from operations of Taro for the FY 2022-23 was USD 572.90 million (INR 4,604.25 crores),” the filing states.

Upon the merger's anticipated completion in the first half of the year, Taro is slated to become a privately held entity, prompting its delisting from the New York Stock Exchange (NYSE), the filing adds.

“The merger is subject to various closing conditions. These include, among other conditions, the approval of the merger by the affirmative vote of shareholders representing at least 75% of the voting power of the Company's shares present and voting in person or by proxy at a meeting of the Company’s shareholders, including at least a majority of the voting power of such shares held by holders other than Sun Pharma and Annexure B its affiliates or any other holders having a personal interest (under the Israeli Companies Law) in the merger and voting thereon. Sun Pharma has agreed to vote its shares in favour of the merger, and has indicated that it is not willing to sell its shares to a third party or support any alternative transaction to the merger,” the company adds.

Notably, in November, the U.S. government dropped charges against Ara Aprahamian, a former sales and marketing executive of Taro Pharmaceutical Industries, which was accused of participating in a conspiracy to manipulate generic drug prices between 2013 and 2015.

This legal development follows Taro's agreement in July 2020 to pay over $200 million to settle criminal allegations related to price-fixing, amidst a broader Justice Department crackdown on suspected pricing irregularities in the generic drug market.