Sun Pharmaceutical Industries, India’s largest drug maker, has announced that it will acquire the remaining 21.52% stake in Taro Pharmaceutical Industries, an Israel-based generic dermatology company, for Rs 2,891.76 crore ($347.73 million). The deal will enable the merger of the two entities and strengthen Sun Pharma’s global presence and portfolio.
The acquisition of 8,086,818 shares (21.52%) will be at the cost of Rs 2,891.76 crore, Sun Pharma said. The Mumbai-based drug major has agreed to acquire all of the outstanding ordinary shares of Taro for $43 per share in cash without interest, as per the definitive merger agreement. Sun Pharma already owns a 78.48% stake in Taro.
The $43 per share purchase price represents a 48% premium over the closing price of $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 $38 per share as proposed on May 26, 2023.
The merger agreement was unanimously recommended by the Special Committee, which was formed by Taro’s Board of Directors to consider Sun Pharma’s proposal. Following a comprehensive evaluation of the proposal with assistance from independent financial and legal advisors, the Special Committee determined that the merger agreement and the per share merger consideration are fair and in the best interests of Taro and its minority shareholders.
Sun Pharma to leverage Taro’s strengths and capabilities
Dilip Shanghvi, Managing Director of Sun Pharma, said, “Over the years, with Sun Pharma’s strategic interventions, Taro has remained a key player in the generic dermatology market in a challenging environment. Post completion of the merger, the combined entity will firmly move forward, leveraging its global strengths and capabilities to better serve the needs of patients and healthcare professionals.”
Uday Baldota, Chief Executive Officer of Taro, said, “Taro is committed to delivering high quality products to our patients and customers around the world. This merger will further enable us to compete effectively in our products and markets.”
Sun Pharma is the world’s fourth largest specialty generic pharmaceutical company and India’s top pharmaceutical company. It has a global footprint across 100 markets, with over 40 manufacturing facilities. It offers a wide range of products, including branded generics, specialty, over-the-counter (OTC), anti-retrovirals (ARVs), active pharmaceutical ingredients (APIs) and intermediates.
Taro is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. It has a strong position in the US, Canada and Israel markets, with a focus on generic and branded dermatological and topical products. It also has a pipeline of products in various stages of development.
Sun Pharma’s stock reacts positively to the merger news
The announcement of the merger boosted Sun Pharma’s stock price, which rose by 2.5% to close at Rs 1,011.85 on the Bombay Stock Exchange (BSE) on Thursday. The stock has gained 15% in the past one year, outperforming the BSE Healthcare Index, which has risen by 11% in the same period.
Analysts have welcomed the merger, saying that it will create synergies and enhance Sun Pharma’s profitability and growth prospects. According to a report by ICICI Securities, the merger will result in a higher earnings per share (EPS) for Sun Pharma, as it will eliminate the minority interest expense and increase the stake in Taro’s cash-rich balance sheet. The report also said that the merger will simplify the corporate structure and improve the governance standards of Taro.