Israeli drug major Taro Pharmaceutical Industries Ltd has decided to withdraw from its merger agreement with Sun Pharmaceuticals, citing differences over the share price and an unexpected operational and financial turnaround since last year.
Sun Pharmaceutical had announced plans to acquire Israel-based Taro Pharma for $455 million (Rs1,789 crore), including equity worth approximately $230 million at $7.75 per share in cash, in mid-May 2007.
Sun Pharma has so far made equity investments in Taro totaling $59 million, including $41 million to help the cash-starved Taro avoid an impending payment default and another $18 million through the exercise of warrants.
Taro, meanwhile, had postponed a shareholder meeting to vote on the proposed merger to the first quarter of 2008, a third time since the announcement of the deal.
Sun's revised offer to raise the merger price to $10.25 per share, with a condition on elimination of a voting threshold required by Israeli law to implement the merger, was not acceptable to the board of directors of Taro, its chairman Barrie Levitt said in a letter to Dilip Shanghvi, Sun's chairman.
Taro said Merrill Lynch had also advised the company that based on most recent projections, $10.25 a share, the same price Sun had paid to Brandes Investment Partners L P in February, was inadequate.
Franklin Advisers and Templeton Asset Management, which holds about 9 per cent of Taro's ordinary shares, had challenged the deal in the Tel Aviv district court citing undervaluation. The court, however, did not issue an injunction to stop the merger proceedings and the case is still pending in the court.
Taro reported net sales of approximately $313 million for the year ended December 31, 2007, with an estimated gross profit of $168 million, or 54 per cent of sales, and net income of approximately $21.1 million, compared to an estimated loss of $141 million in 2006.