Company Watch

Sun acquires Taro for $454 mn

Our News Bureau - Mumbai

Sun Pharmaceutical has acquired Taro Pharmaceuticals for $454 million in an all cash deal. Taro is a multinational generic manufacturer with established subsidiaries, manufacturing and products across US, Israel and Canada. Interestingly, Taro had run into substantial loss by the end of 2006. Sun Pharma will refinance $224 million in net debt of Taro. In addition, to provide immediate liquidity for Taro, Sun Pharma will provide interim financing to the extent of $45 million.

Sun Pharma intends to fund the acquisition with internal accruals and proceeds from its earlier $350 million FCCBs. This deal values Taro's equity at $230 million, or $7.75 per share, which is at a 27 percent premium to its May 18, 2007 closing price of $6.10. This deal is subject to Taro shareholder approval and requisite regulatory clearances.

Taro has a strong franchise in dermatology and topical products, in addition to products in cardiovascular, neuro-psychiatric and anti-inflammatory therapeutic categories. The company also comes in with large, world class sites with necessary regulatory approvals in Canada and Israel. These sites manufacture topical creams and ointments, liquids, capsules and tablets dosage forms which complements Sun's current manufacturing and development capabilities in the US. "This is a good opportunity for Sun and Taro to work together to create increasing value and add a complimentary multinational organisation to Sun's business. We intend to build on Taro's expertise in dermatology and pediatrics, along with specialty and generic pharmaceuticals, and over-the-counter products," says Dilip Shanghvi, Chairman & Managing Director, Sun Pharmaceuticals.

Taro US has more than 100 ANDA drug approvals in the US alone, with one NDA as well as 26 ANDAs awaiting approval with the USFDA. Taro also manufactures APIs, including complex chemistry and steroids at its site in Israel. Over $225 million has been invested by Taro in capex in the last three years, which provides Sun with additional capabilities. Taro has also invested over $190 million in R&D. Among its active projects, is a molecule T-2000, which is a non-sedating barbiturate for essential tremors which is undergoing Phase II trials. This is in addition to projects in formulation development for ANDA filings and process chemistry for APIs. A novel formulation Ovide, a lice treatment is another interesting product in their portfolio of proprietary products.

Along with the advantages Taro brings in with it certain legal issues. On May 10, 2007 Franklin Advisers and Templeton, the beneficial owners of approximately nine percent of the Taro's ordinary shares, filed a motion in Tel-Aviv District Court to prevent what they allege to be discrimination against minority shareholders.

On May 19, 2007 Franklin Advisers and Templeton filed a request with the court for a temporary injunction to prevent Taro from entering into any transaction which might result in discrimination against minority public shareholders. The motion was scheduled to be heard on May 21, 2007. However, Sun Pharma believes that the proceedings initiated by Franklin Advisers and Templeton are without merit and are detrimental to the best interests of shareholders and Taro. Taro intends to contest the action vigorously.