Sun Pharmaceutical Industries Ltd has extended the tender offer for purchase of all outstanding ordinary shares of Israel's Taro Pharmaceutical Industries Ltd up to 5:00 pm New York time on 2 September, within days of Taro's board asking its shareholders to reject Sun's offer as it was ''financially inadequate''.

The offer had previously been scheduled to expire at midnight on Monday, 28 July.  Sun had commenced the tender offer through its Hungarian subsidiary, Alkaloida Chemical Company Exclusive Group Ltd, which has received 700 ordinary shares from Taro shareholders.

The company said that it had extended the date at the recommendation of Judge Dr Michal Agmon-Gonen J. of the Tel-Aviv District Court to enable the court to rule on the merits of the litigation that Taro and is affiliates had filed against Alkaloids on the applicability of the special tender offer rules under the Israeli Companies Law to the Offer.

In May 2007 Sun had enterd in to an all-cash $454-million to acquore the Israeli firm. (See: Sun Pharmaceutical to acquire Taro Pharma for $454 million) The acquisition included refinancing of $224 million of Taro''s net debt along with acquiring Taro''s equity for $230 million or $7.75 per share, a 27 per cent premium to its 18 May, 2007, closing price of $6.10.

In addition, to providing immediate liquidity for Taro, sun will provide interim financing to the extent of $45 million.

Sun, which already owns 36 per cent of Taro shares, decided to push through with a hostile offer to Taro shareholders, after the Israeli firm revoked its earlier agreement to be acquired by Sun and unilaterally terminated its $454-million merger agreement, entered a year ago, saying that since then, its finances had improved and that it preferred not to be acquired.(See: Israel's Taro to terminate merger with Sun Pharmaceutical) 

To scuttle the agreement it then attempted to sell its Irish plant, an asset that Sun Pharma regarded as being integral to the deal.

Sun, which owns 36 per cent of TAro's shares, commenced the tender offer to acquire Taro's shares on 30 June, five days after excercising its 'buy option' on 25 June under the terms of the agreement that Alkaloida had entered into with the controlling shareholders of Taro at the offer price of $7.75, as per the agreement.

Taro's shares are currently quoting at $9.45.

Taro has filed lawsuits against Sun Pharma in the Israeli court to prevent the Indian company from moving ahead with its offer to acquire shares from Taro shareholders. Sun has hauled Taro's board of directors to the Supreme Court of New York for fraud, and also urging that Taro be ordered to follow the terms of the Option Agreement be followed.

Sun Pharma says that the merger agreement with Taro provides it the right to acquire all shares held by the Taro's promoters for free in case the israeli firm firm fails to consummate the deal. Reports say that due to differential voting rights attached to the shares, Sun can get voting rights of 8 per cent and 33 per cent, respectively, if it's offer is fully subscribed.

Yesterday, Franklin Templeton, one of the Taro's minority shareholders, rejected Sun Pharma's offer, saying the shares should be valued much higher.

Mark Mobius, MD, Templeton Asset Management, told CNBC-TV18, "Taro's prospects look very good. However, Sun's price is too low. We are looking at $20 per share being the right price for Taro."

According to Mobius, Sun Pharma's capital infusion has helped Taro's financial stability.

He said Israel law may prevent the promoters from selling out if minority shareholders are opposed to the deal. "Even if Sun wins the case in New York, they will have to fight in Israel. However, one needs to wait for both New York, Israel courts to take decisions."

(See: Mark Mobius objecys to Sun's acquisition of Taro)