Mumbai: Mumbai-based drug maker Sun Pharmaceuticals Industries Ltd has rejected a $215 million offer from US-based banker and financial advisor Guggenheim Securities Llc to buy its 36% stake in Israel’s Taro Pharmaceuticals Industries Ltd.
On behalf of chairman Dilip Shanghvi, Sun Pharma’s director Sailesh Desai on 29 May wrote to Guggenheim executive chairman Alan D. Schwartz that his firm’s goal was to acquire control of Taro and would therefore decline Guggenheim’s offer.
The offer valued Taro’s shares at $15 each, a 93% premium over what Sun Pharma paid to acquire 14.4 million shares in 2007.
An Indian analyst suggested that the Guggenheim offer was acceptable.
Ranjit Kapadia, vice-president, institutional research, HDFC Securities Ltd, said Sun Pharma management should now exit the prolonged takeover litigation for the interest of minority shareholders.
“The Guggenheim proposal offers about 25% annual return for Sun Pharma’s $110 million investment that is held up in Taro with no return for the last three years,” he said.
On Wednesday, Sun Pharma’s shares rose 0.02% to close at Rs1,680.60 on the Bombay Stock Exchange, whose benchmark Sensex index rose 1.02% to 16,741.84 points. Sun Pharma’s stock has risen steadily over the past five days on speculation that a foreign investor had shown interest in its Taro stake.
The scrip had breached the Rs1,700 mark on Tuesday before closing at Rs1,680.25, a 0.01% increase on a day the Sensex fell 2.2%
Sun Pharma, India’s largest drug maker by market capitalization, has been fighting a takeover battle with the Israeli drug maker’s promoter after the latter terminated a merger agreement that the two had signed in May 2007 citing disagreements on valuation.
In the agreement, Sun Pharma had agreed to acquire a controlling stake in Taro at $7.75 a unit.
On Wednesday, Taro said in a filing to the US Securities and Exchange Commission that Guggenheim had delivered a letter to Shanghvi advising the Indian company that Guggenheim was highly confident it could arrange the purchase of Sun’s stake in Taro by institutional investors at a price of $15 per share, a 7.2% premium to the closing price of Taro shares on Tuesday.
The Indian firm launched an open offer in 2008 for a controlling stake and shares held by minority shareholders in the US—where the shares are listed—and is also in litigation with Taro in Israel and the US.
Taro in its filing to SEC said that Guggenheim sent the offer to Sun Pharma after meeting with a number of institutional investors, and also on the basis of its review of information and projections for Taro that were provided to it on a confidential basis.
Guggenheim has been retained by the Taro board to review strategic alternatives, including the possible purchase of Sun Pharma’s equity interest by a third party, which might resolve pending disputes between the two firms while preserving the benefits of its minority shareholders, the Israeli firm said in its filing.
A Sun spokesperson declined to say anything beyond the company’s response to Guggenheim. “Taro has made an SEC filing which includes response from Sun Pharma,” he wrote in an email.