Veteran Israeli pharmaceutical company Taro (NYSE: TARO), which has been listed on the New York Stock Exchange for over four decades, is being wholly taken over by Indian company Sun Pharmaceutical Industries Limited (Sun Pharma), and will be delisted from the exchange. Sun Pharma already controls Taro. Taro reported that it had entered into a merger agreement whereby Sun Pharma will buy all of the outstanding ordinary shares of Taro that it does not already hold for $43.00 per share in cash. Taro employs about 1,550 people in Israel.
Sun Pharma currently holds 78.5% of Taro. The merger deal values Taro at over $1.6 billion, representing a modest premium on the company’s current market cap, although Taro points out that the premium over the company’s share price when Sun Pharma first announced its intention of buying out the public’s holdings in the company in May last year is 48%. Sun Pharma initially offered $38 per share, but raised its offer to $43 last month. A special committee formed by the Taro board of directors to examine Sun Pharma’s increased offer unanimously recommended accepting it.
Founded in 1950, still operating in Haifa
Taro’s share price reached an all-time high of $150 in 2015 (adjusted for dividends distributed since then), giving the company a market cap of $7.4 billion, much higher than its valuation in the current deal. The deal requires the approval of the shareholders, and by a majority of the shareholders unconnected to Sun Pharma.
Taro was founded in 1950 in Haifa. Its aim was to form collaborations between pharmacists in Israel and the US in order to meet the needs of the local population. The company produces and markets generic prescription and over-the-counter drugs for treating pain, skin maladies, the digestive system, and other applications. Over the years, Taro has expanded its activity to other countries. It became listed in New York in 1982, and since the 1980s it has sold its products in the US.
Sun Pharma is traded on the National Stock Exchange of India at a market cap of $38 billion, after a 28% rise in its share price last year. It became the controlling shareholder in Taro in 2010 after a prolonged control battle that was decided in the Israeli Supreme Court.
In the half-year to September 2023, Taro’s revenue grew by 7% to $307 million, and its net profit grew by 65% to $18.6 million. The company swung from a negative to a positive cash flow, of $55.3 million, and at the end of the period it had $1.3 billion cash, which represents a large proportion of its market cap.
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Sun Pharma CEO Dilip Shanghvi said, “Over the years, with Sun Pharma’s strategic interventions, Taro has remained a key player in the generic dermatology market in a challenging environment. Post completion of the merger, the combined entity will firmly move forward, leveraging its global strengths and capabilities to better serve the needs of patients and healthcare professionals.”
Published by Globes, Israel business news – en.globes.co.il – on January 21, 2024.
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