Sun Pharmaceutical Industries has received a shot in the arm from the Supreme Court of Israel in its three-year-old battle to gain control of drugmaker Taro.
The apex court dismissed an appeal by Taro, which was attempting to block Sun’s offer to buy all outstanding shares of the company. The ruling in favour of Sun was dictated by concerns of fairness, good faith and commercial stability, the court declared, while affirming that Taro and its directors had acted in bad
faith.
The development implies that Sun, which currently holds 36% in Taro, can go ahead and take management control of the company, something it has been trying for the past three years.
The battle goes back to May 2007, when Sun struck a deal to take control of Taro for $454 million or $7.75 per share. A year later, Taro terminated the agreement saying Sun’s original offer was too low.
Dilip Shanghvi, Sun’s chairman and managing director, said the company is ready to move forward to close the offer and enforce its rights under the Option Agreement to purchase the controlling shares of the Levitt family, who are the promoters of Taro.
Analysts feel the development is positive for Sun, though much depends on the responses of minority shareholders of Taro.
According to Ranjit Kapadia, vice president, institutional research, HDFC Securities, Sun will get 12% stake from the Levitt family.
“But it all depends on other shareholders and how they react to Sun’s offer price. Sun’s offer at $7.75 per share is lower than the current share price of $11.4. However, it puts an end to the thought that Sun was unfair to shareholders,” said Sarabjit Kour Nangra, vice-president, research, Angel Broking.
Analysts say about 20 million Taro shares are still outstanding with minority shareholders and Sun might have to make an attractive offer to attract the minority shareholders if it wants full control of the company.
“If outstanding shares were to be fully tendered to Sun’s open offer, it would lead to outflow of $220-250 million cumulatively,” said an analyst with a Mumbai-based brokerage house.
Comments