Sun Pharma increases offer price to acquire remaining outstanding shares of Taro

India's largest drugmaker, Sun Pharma Ltd., has revised its offer price higher to acquire the remaining shares of its US-unit Taro Pharma, according to an exchange filing on Tuesday.

Sun Pharma has now proposed to acquire all of Taro's outstanding shares other than those held by the company or its affiliates for $43 per share in cash, compared to the earlier proposal of $38 per share.

In May this year, Sun Pharma's board had submitted a non-binding indication of interest to increase its stake in Taro to 100%, in a deal valued at nearly $300 million.

Since the submission of that proposal, shares of Taro have already risen by 29%, closing Monday's trading session at Sun Pharma's previous offer price of $38.

Shares of Taro rose 8.6% in extended trading in the US on Monday after Sun Pharma's revised offer.

Sun Pharma currently holds 78.48% stake in Taro. The company had initiated similar plans a decade earlier as well. In case the transaction materialised, Sun Pharma planned on delisting Taro from the New York Stock Exchange (NYSE).

In Tuesday's exchange filing, Sun Pharma mentioned that the special committee agreed in principle with the revised proposal and that negotiations for the revised proposal and terms for a definitive agreement are currently ongoing.

However, the company has highlighted that no assurance can be given that a definitive agreement will be reached or the revised proposal will be consummated.

The revised proposal from Sun Pharma is subject to further corporate approval, negotiations and satisfaction of other customary conditions. This also includes approval from shareholders of Taro, who control the majority vote, excluding Sun Pharma and its affiliates.

Sun Pharma had proposed a reverse triangular merger for this move. For this, the company will form a wholly-owned subsidiary in the form of a Special Purpose Vehicle (SPV), which will enter into a merger agreement with Taro.

In an interaction with CNBC-TV18 last month, Sun Pharma's Group CFO CS Muralidharan had said that Taro's board had appointed a committee to look into Sun Pharma's de-listing proposal and that the offer is being looked into.

Shares of Sun Pharma also ended little changed on Monday at ₹1,235.30. The stock has risen 24% so far in 2023.