Sun Pharma calls off $600-million plan to buyout remaining stake in Taro

In another twist to Sun-Taro battle, the domestic drug major today called off nearly $600 million plan (over Rs 3,100 crore) to acquire outstanding shares of Israel's Taro Pharmaceutical citing pricing issues.

The domestic pharma major also said hiking the offer price - to acquire remaining stake in Taro - would not be in "in the best interest of shareholders".

The unexpected development negates Sun Pharma's efforts to fully acquire Taro Pharmaceutical, which had agreed to the deal in August 2012 after nearly five years of bitter legal battle.

Sun Pharma's latest buyout offer of $39.50 per share for 15 million scrips was 61 per cent higher than its previous offer of $24.50 - which was rejected by Taro. Taro's shares closed yesterday at $50.55 apiece.

In a statement, Sun Pharma said "they have mutually agreed to terminate their merger agreement".

"Sun Pharma has been considering the reaction of Taro shareholders to the proposed buyout and  concluded that Taro's shareholders would be unwilling to approve the merger unless price was increased substantially.

"... and Sun Pharma decided it would not be in its shareholders' interest to do so," Sun Pharma Managing Director Dilip Shanghvi said in a conference call.

Currently, Sun Pharma has 66.5 per cent stake in Taro. "Each of Sun Pharma and Taro (at the direction of the Special Committee) agreed that terminating the merger agreement was in the best interest of the respective companies and shareholders," the statement said.

Sun Pharma had acquired a controlling stake in Taro in September 2010, after nearly four years of legal wrangling. The proposed merger agreement provided that all shareholders of Taro other than Sun Pharma and its affiliates would receive a cash payment of $39.50 per share upon deal closure.

Subsequently, Taro would have become a privately held company.

In July last year, Taro's board had rejected Sun Pharma's offer to purchase all the outstanding shares of the Israeli firm that would have entailed an outgo of $367.5 million (over Rs 1,810 crore). This was after  the special committee of Taro's board said the offer price was inadequate.

In November, 2012, Taro had postponed a meeting of shareholders to consider the company's proposed merger with Sun Pharma.

Shares of Sun Pharma today closed at Rs 744.05 on the BSE, down 0.63 per cent from its previous close.