Sun pharma raises the heat on Taro

[vishnuvega]

Sun Pharmaceutical Industries, the country’s most valuable drugmaker, has decided to launch a hostile bid for Israel’s Taro Pharmaceutical Industries.

This is a rare instance of an Indian company making an unsolicited bid for a foreign firm. The move follows Taro’s rejection of a merger agreement with Sun last month. Taro had termed the offer ‘inadequate’.

Sun said on Thursday it will offer to purchase all outstanding shares of Taro in the next few days at $7.75 a share, the rate that both the companies had agreed upon a year ago. Sun, which already holds a 36% stake in Taro, said the offer is in line with the 2007 merger agreement between the two companies.

Under the accord, Taro’s controlling shareholders, led by chairman Barrie Levitt, granted Sun the option to acquire all its shares if the merger failed.

Sun Pharmaceutical has also filed a lawsuit in the Supreme Court of the State of New York against Taro and its board of directors, requesting the court to order the controlling shareholders to honour the 2007 merger agreement.

The successful acquisition of Taro will help Sun expand its marketing reach in the US, where demand for generics continues to grow as healthcare costs surge and more blockbuster drugs go off patents.

In May 2007, the Indian drugmaker offered to buy Taro for $7.75 per share—totalling $230 million in cash and an additional $224 million to refinance the latter’s debt. Sun has given Taro $60 million in cash to revive the company and subsequently raised its offer to $10.25 a share.