Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF.PK), controlled by the Levitt and Moros families, will be sold in its entirety to Sun Pharmaceutical Industries Ltd. (NSE: SUNPHARMA, BSE: 524715) of India for $454 million. Taro's current market cap is about $180 million.
Sun will pay some $230 million to buy the shares in Taro. The remainder of the purchase price will go to cover Taro's debts. Sun will pay $7.75 for each Taro share, a price that represents a premium of 27% over the share's closing price last Thursday.
Taro and Sun also announced that they have entered into a separate agreement for Sun to provide immediately $45 million of interim equity financing to Taro by acquiring 7.5 million of the company's ordinary shares.
A newly formed Israeli subsidiary of Sun will merge with Taro, and each ordinary share of Taro will be converted into the right to receive $7.75 cash. The companies said that the merger was subject to a number of terms and conditions, including the approval of Taro's shareholders and regulatory review.
Merrill Lynch, Pierce, Fenner & Smith Incorporated provided a fairness opinion to the Taro board in connection with the proposed merger.
Sun will pay all shareholders, including the Levitt and Moros families, who founded Taro, $7.75 for each ordinary share. There will be no consideration paid to Dr. Levitt for the Founders' Shares, which have one-third of the voting power in the company.
"We are pleased that this transaction meets our objectives of achieving value for our shareholders and establishes Taro as an integral platform for growth within the Sun organization," said Taro chairman Barrie Levitt. "Sun is a highly respected, multinational pharmaceutical company and is an excellent home for our employees and our products. We very much appreciate the support of our employees, customers and financial institutions during the recent months and believe that the transaction with Sun will put Taro on a course towards financial stability and growth in its worldwide markets."
Sun chairman and managing director Dilip Shanghvi said, "We look forward to working with Taro and its employees going forward. This is a good opportunity for Sun and Taro to work together to create increasing value and add a complementary multinational organization 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. With the addition of 170 talented scientists to our team we look forward to an increasing number of product filings of higher complexity."
In a report on the acquisition deal, analyst Randall Stanicky of US investment house comments, "This announcement, and reported contact with 20 different parties, is in line with our view that global generics consolidation is likely to accelerate."
Stanicky describes the acquisition price as "light", saying, "While a 27% premium to Friday’s close, the acquisition price falls 15% below the March 20 share price when Taro announced its intention to pursue a potential sale. Moreover, multiples come in at the low-end of recent deal comps where median multiples have been 3.1X on LTM revenue and 13.8X EBITDA, which may reflect Taro’s challenged competitive positioning and more modest pipeline outlook."
Stanicky notes that, on May 10, Franklin Advisors and Templeton Asset Management, which together own 9% of Taro, filed a motion in Israel seeking appointment of a special interim manager to review Taro’s efforts in identifying strategic alternatives. Over the weekend, they filed for an injunction to prevent Taro from entering into any deals. The motion is to be heard today.
Taro said in its announcement, "If the court blocks the interim equity financing with Sun, Taro will not be able to make timely payment of the principal and interest payment due on its 2003 bonds on May 21, 2007. The motion for a temporary injunction is scheduled to be heard on May 21, 2007.
"The company believes that the proceedings initiated by Franklin Advisers and Templeton are without merit and are detrimental to the best interests of shareholders and the company. The company intends to contest the action vigorously."
Taro also announced today that it had appointed Thomas E. McClary, CPA to the position of group vice president and chief financial officer, replacing Ron Kolker, group vice president and corporate controller of Taro, who has served as interim CFO since October 2006.
McClary was previously vice president of international finance and chief accounting officer at Ivax Corporation until the company was acquired by Teva Pharmaceutical Industries in 2006. Before that, McClary held positions that included corporate controller and treasurer of Solopak Pharmaceuticals, Inc., and senior manager at Deloitte and Touche.
Published by Globes [online], Israel business news - www.globes.co.il - on May 21, 2007
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