Indo-Israel Pharma Merger Proposed Between Sun Pharma And Taro: How Will It Pay-Off

Mergers and acquisitions are known to be a great form of innovations to consolidate the growth of the companies under consideration.

India has opened its sources of M&As in the past years and several leading companies are found to follow the trend in the pharmaceutical industries as well.

In similar harmony, the pharma majors of India and Israel indicate a striking deal at hand with Sun Pharma proposing to buy Taro Pharma Industries with 100 per cent stakes in an all-cash deal.

A reverse triangular merger of the two pharma industries could be witnessed after the deal successfully takes place.

Mumbai based Sun Pharmaceutical Industries Ltd currently is in possession of 78.48 per cent of the stakes of Israel based Taro Pharmaceuticals Industries Ltd.

The Indian drug giant had issued a letter to Taro committee on Friday revealing their non-binding interest to procure all the outstanding ordinary shares of approximately 81 lakhs of Taro at a valuation of 38 dollars per share.

A special committee has been appointed by Taro to review the proposal.

What Will The Merger Bring Forth?

The reverse triangular merger will benefit India’s biggest drug maker with all the outstanding shareholding of 21.5 per cent in the U.S. subsidiary of Taro Pharma on a fully diluted basis, that would be worth 307 million dollars.

One of the major advantages of the merger would be streamlining of their in-house processes and elimination of redundant affairs, which would give enormous headway to new developments and assist in the progress of the company as a whole.

A compelling door to the liquidity opportunities would be open to the shareholders of the company, which in turn would be fruitful for all the stakeholders of the company as well as Sun Pharma itself, if the proposed transaction is achieved.

What’s more, the deal is deemed to be quite an accretive transaction for the company, owing to the assets held by Taro pharma which comes about as 1.3 billion dollars, constituting 274 millions dollars of short-term bank deposits and cash.

Once the merger is finalized, Sun Pharma will have complete autonomy over the utilization of 1.3 billion dollar assets of the Taro Pharma, which it can predominantly use for the company’s proliferation in terms of profit and
revenue.

For Sun Pharma, the proposition is critically acclaimed as favorable considering all its previous track record of highly successful acquisitions.

Take-Over Requirements

Sun Pharma would be entailed to form a Special Purpose Vehicle (SPV) or a wholly owned subsidiary under the Israeli Companies Law 1999 (ICL), which would then enter into the merger settlement with Taro Industries, to comply with the Reverse Triangular Merger.

After the acquisition is completed, Taro will be delisted from the New York Stock Exchange (NYSE), taking away its right to trade on NYSE as an individual entity, and will thenceforth become a wholly owned subsidiary of Sun Pharma.

The price would be payable after the full closing of the proposed deal, after which Sun Pharma would have a 100 per cent holding of Taro Israel.

In its filing to the exchanges, Sun Pharma declared that the proposed price is a representation over Taro’s closing price.  A premium of 31.2 per cent above closing price of Taro on 25 May 2023 in addition to the premium of 41.5 per cent over the average closing price of Taro in last 60 days describes the tender.

However, the acquisition will not include the shares owned by Sun Pharma or its affiliates.

A final approval is still awaited from the Board of Directors and Management team of Sun Pharma.  Therefore, the proposed transaction is not bound by any strict timelines for completion.

In order for the agreement to become effective, it should be fully complied to.  Thus, the deal would be called to completion only after the approval of all governing bodies, inclusive of the third-party approvals and shareholders of Taro if need arises, in addition to the accomplishment of binding contractual documentations.

Sun Pharma – No. 1 In India

The fourth largest specialty generic pharma firm around the globe has the king of the pharmaceutical world, Dilip Shangvi as its founder and managing director.

The latter-day press release from the company saw the appointment of an Independent Director, Rolf Hoffmann and Whole-time director Aalok Shangvi each for a period of five years.

Sun Pharma reported a 12 per cent rise on revenue year-on-year (YoY) at Rs. 10,726 Crore compared to the Q4FY22 of Rs. 9,560 Crore.

Nevertheless, the profit was found to be sequentially lower than Q3FY23 which stood at Rs. 2,166.01 Crore against the consolidated net profit of Rs. 1,984.47 in Q4FY23.  Be that as may, it was observed to be profitable than the Q4FY22 which noticed a loss of Rs. 2,277.25 Crore.

Proofread & Published By Naveenika Chauhan