Sun Pharmaceuticals has bought out Taro Pharmaceutical Industries, the Israeli manufacturer of low-cost medicines, for $454 million (Rs 1,845 crore). Sun Pharmaceuticals is India’s largest pharmaceuticals company in terms of market capitalisation, at Rs 20,689 crore on Monday.
The buy will catapult Sun Pharma into the major drug markets of the US and Canada, where Sun’s low-cost manufacturing, tied with Taro’s brand name could give Sun Pharma an edge over its rivals like Ranbaxy and Cipla.
Taro, headquartered in Haifa, Israel, was established in 1959, and has been listed since 1961 in the US, according to a release from the two companies.
“We felt the company had all the ingredients to make Sun Pharmaceuticals successful in markets abroad,” Dilip Shanghvi, chairman and managing director, Sun Pharma, told Hindustan Times.
Eighty-five per cent of Taro’s revenues come from markets in the US, and it was a profitable company till 2005. It ran into losses in 2006, Shanghvi said.
The acquisition, subject to a court ruling, would enable Sun Pharma access the US market without setting up a separate entity there, said an analyst who did not wish to be identified.
On Saturday, Franklin Advisers and Templeton filed a request with the court for a temporary injunction against the deal, saying that the deal might harm minority shareholders. The motion was heard on Monday and a ruling is due.
Franklin and Templeton together hold 9 per cent of Taro.
Shanghvi, however, said there was little possibility of the transaction being stopped. “We are awaiting the ruling and will take steps accordingly,” he added.
Taro had reported 2005 sales of $298 million (Rs 1,206 crore) and profit of $5.7 million (Rs 23 crore). The deal values Taro’s equity at $230 million (Rs 930.93 crore), or $ 7.75 (Rs 313.68) per share, which is a 27 per cent premium on its Friday closing price of $6.10 (Rs 246.90). Sun Pharma will also refinance $224 million (Rs 906.64 crore) in net debt of Taro. In addition, to provide immediate liquidity to Taro, Sun Pharma will provide interim financing to the extent of $45 million (Rs 182.14 crore).
Taro operates mainly through three entities: Taro Pharmaceutical Industries Ltd., or Taro Israel, and two of its subsidiaries, Taro Pharmaceuticals Inc, or Taro Canada, and Taro USA.