In a deja vu of sorts, Sun Pharmaceutical Industries’ efforts to mop up all shares in Taro Pharmaceutical has been opposed by a minority shareholder. Krensavage Asset Management LLC, the largest minority shareholder in Taro Pharma, said in a statement that it opposed Sun’s “paltry bid to take Taro private”.
Sun Pharma currently holds 78.5 per cent in Taro and in May, it had offered to acquire the remaining shares in Taro for $38 a piece, valuing the company at $1.4 billion.
‘Offer inadequate’
“Sun’s inadequate offer amounts to a 17 per cent discount to the value of Taro’s tangible assets, namely $36 a share of net cash. If Taro liquidated, shareholders could receive more than $45 a share,” according to the statement.
It added, “Taro boasts more than just cash and real estate. The maker of generic creams and ointments generated $2.4 billion of cash in the 10 years ended March 31. Not only is Sun failing to offer a control premium, but it also seemingly ignores Taro’s 22 generic drugs awaiting clearance in the US, including four with tentative approvals.”
With a market value of $31 billion, Sun can pay more, the statement said, adding, “Sun is offering, net of Taro’s cash, $16 million for the roughly 8.1 million Taro shares it doesn’t own.”
Second attempt by Sun Pharma
Sun’s latest offer to buy out and delist Taro from NYSE, comes 10 years after its last effort was terminated. In 2007, Sun had made a $454-million offer for Taro — a deal it sealed after the two companies fought a long, cross-country battle. Sun’s efforts to mop up all the outstanding shares ran into resistance from a section of minority shareholders. With about 66 per cent in Taro, Sun eventually abandoned a revised, sweetened proposal to mop up all the remaining shares in 2013.
Sun Pharma has not responded yet to the statement from the minority shareholder.
Meanwhile, Krensavage said, “Taro’s actions suggest it agrees with our assessment. In December 2019, Taro paid $91 a share to repurchase its stock in a tender offer – nearly two-and-one-half times Sun’s current bid.”
“Refuse to support”
Sun’s tactics ring familiar, the shareholder said of the latest offer for Taro, where Sun was expected to fork out about $300 million.
“In October 2011, it lowballed Taro’s shareholders with a $24.50-a-share bid. Ten months later, Sun raised its offer more than 60 per cent to $39.50 after a special committee of Taro directors rejected the bid.”
Sun requires a go-ahead from a majority of Taro’s minority shareholders. “Unless Sun acknowledges Taro’s value, we refuse to support the transaction,” the statement said.