Sun Pharma to acquire remaining outstanding shares of Taro for ₹2,891 crore

Taro Pharma, the US-based unit of India's largest drugmaker Sun Pharma Ltd., has announced a merger agreement with the latter, under which, Sun Pharma, Taro's controlling shareholder, will acquire all remaining outstanding shares of its subsidiary.

Sun Pharma will acquire the remaining 21.52% outstanding shares of Taro for a cash consideration of $43 per share, amounting to $347.73 million or ₹2,891.76 crore, based on the USD-INR exchange rate of January 18.

The acquisition price is a 48% premium to Taro's closing price on May 25, 2023, which was Taro's last trading day before Sun Pharma submitted its first non-binding bid and a premium of 58% to the volume-weighted average price of Taro's shares during the 60 days prior to and including May 25 last year.

Taro's shares ended Wednesday's trading session at $41.28, almost at par with the proposed acquisition price.

The merger is subject to various closing conditions, including shareholder approval of at least 75% of the voting power of the company's shares, including a majority of those shareholders other than Sun Pharma and its affiliates. Sun Pharma has also indicated that it is not willing to sell its shares to a third party or support any alternative transaction to the merger.

Post the merger, which is expected to close in the first half of 2024, Sun Pharma will take Taro private and its shares would no longer trade on the New York Stock Exchange.

Sun Pharma had first submitted a non-binding bid to acquire the remaining outstanding shares of Taro for a cash consideration of $38 per share or nearly $300 million. It had earlier proposed a reverse triangular merger for this move, under which Sun Pharma would form a Special Purpose Vehicle (SPV), which will then merge with and into Taro.

In December last year, Sun Pharma had increased its bid to acquire the remaining outstanding shares to the current $43. Sun Pharma currently owns 78.48% of Taro.

Sun Pharma Group CFO CS Muralidharan had told CNBC-TV18 in November last year that the company has a net cash balance of $1.9 billion on a group level and a special committee was looking into Sun Pharma's offer to de-list Taro. He had further said that the company will look at Merger & Acquisition (M&A) opportunities if and when an opportunity arises.

Taro Pharma's shares rose 1% in extended trading on Wednesday in the US.