India’s largest drug maker by market value, Sun Pharmaceutical Industries Ltd, has extended the closure of its open offer for Taro Pharmaceuticals Ltd by more than a month, in “response to (a) Tel Aviv court’s recommendation”, the company said in a statement released Tuesday.
The offer, which was scheduled to close on 28 July, will now run till 2 September. Sun Pharma, which currently holds around 36% in Taro, had on 30 June commenced the open offer for Taro shares in the US following the Israeli company’s decision to terminate a merger agreement that it had signed with Sun a year ago.
The extension of the open offer was recommended by the Tel-\ Aviv district court which wanted the time to consider the merits of a suit filed against Alkaloida Chemical Co. Exclusive Group Ltd, a subsidiary of Sun Pharma, and its affiliates, by Taro on the relevance of the open offer under the Israeli company law.
“Such recommendation for extension was agreed upon by all parties,” said a Sun Pharma spokesperson. Sun Pharma’s offer is in keeping with the terms of an option agreement between Alkaloida and the controlling shareholders of Taro in the event of a failure of the merger deal.
As reported by Mint on 2 July, the option agreement, if honoured, will allow Sun Pharma to acquire shares of Taro from the controlling shareholders. The option agreement required Alkaloida to commence a tender offer at $7.75 (Rs335) per share of Taro held by other shareholders.
The Sun Pharma statement said public shareholders have already tendered some 700 shares on 11 July despite Taro’s board rejecting the offer and asking its shareholders not to sell shares to Sun Pharma.
According to people involved in the Sun Pharma-Taro merger deal in May 2007, who do not wish to be identified, Sun Pharma should gain management control in Taro as the option agreement mandates that the 4.8 million ordinary shares held by the promoters and another 2,600 founder shares have to be sold to Sun. Mint’s earlier report quoted a person familiar with the deal as saying that: “These shares will give Sun voting rights of 8% and 33%, respectively.”
Sun Pharma already has 24% voting rights in Taro from the 36% stake that it acquired in two separate transactions following the 2007 merger agreement. If the option agreement is honoured, Sun Pharma will hold 65% voting rights and at least 51% of the stake in Taro. It also has 3.8 million warrants, which can be converted into a further 3% stake in the company. Taro’s promoters currently hold 12% stake in the company.
The merger deal ran into trouble after the management of the Israeli company wrote to Sun Pharma two months ago that its board has terminated the proposal, dubbing the May valuation of $7.75 for Taro share “inadequate”.
Sun Pharma, which has been following a growth strategy of taking over loss-making companies and turning them around by fresh fund infusion, had pumped in $60 million in Taro—then a loss-making company—after it signed a $454 million acquisition deal in 2007.