Taro Pharma shareholder rejects Sun Pharma's revised offer

MUMBAI: A minority shareholder of Israel's Taro Pharma on Monday rejected Sun Pharma's sweetened offer price of $39.5 a share for a buyout, signalling further delay in the Indian company's protracted takeover bid.

Grand Slam Management, the minority shareholder, has also urged the other minority stakeholders of Taro to follow suit.

"We haven't decided that we need to go to court. We believe that it is highly likely that other shareholders feel as we do and can block the deal with more than 50% of outstanding minority shares," Mitch Sacks, the chief investment officer of Grand Slam Asset Management, told ET.

Sun Pharma's revised offer, made earlier in the day, was 60% higher than the $24.50 it had suggested in October, which was subsequently rejected by Taro's minority shareholders on the ground that it was inadequate considering the improvement in the company's performance.

"We believe this offer to be wholly inadequate and intend to vote our shares against this transaction," Grand Slam told shareholders in a letter, a copy of which is with ET.

"As we understand Israeli law, and as set out in point three of Sun's offer, this transaction still requires the approval of more than 50% of the minority shares outstanding," the letter added.
While Sun Pharma refused comment, Raging Capital and Guardian Point Capital, the other minority shareholders of Taro, did not respond to ET's email query on the development.

Grand Slam told shareholders that "Sun Pharma's previous offer was 7.2 times Taro's EBITDA, but the current offer values the company at only 4.8 times".

"Had Sun merely kept their previously inadequate multiple, their offer would have increased to at least $55 per share. At our suggested 15 times LTM EBITDA multiple, the offer should have been for $110 per share," Grand Slam said.

After revising its offer price, Sun Pharma had said it would spend $571million to acquire 44 million shares of Taro. Taro has been one of the major contributors to Sun Pharma's revenues. Sun had acquired about 66% stake in the Israeli generic firm in 2007 for $450 million, but got control of the firm only in 2010 after a legal battle with Taro's promoters: the Leavitt family.

In India, analysts were divided over this issue.

"The current offer by Sun is a fair price," said Ranjit Kapadia, vice-president of Centrum Broking. Sun Pharma's offer is close to Taro trading price of about $40.97 on the NYSE.

Angel Broking's Sarbjit Kaur said, "I see less probability of minority shareholders giving up their shares at the present value."

In its letter, Grand Slam said Sun Pharma could now "open up the sale process to outside bidders". "We believe that Sun can sell its interest in Taro for significantly more than five times LTM EBITDA to another pharmaceutical manufacturer. Such a process would also allow Taro's board to fulfill its fiduciary responsibility to obtain the best price for all shareholders," Sacks said.