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Feb 09, 2013, 03.56 PM IST | Source: CNBC-TV18

Sun Pharma, Taro terminate merger deal

Taro Pharmaceutical and Sun Pharma have mutually agreed to terminate their merger agreement, announced in August 2012, reports CNBC-TV18's Archana Shukla.

Taro Pharmaceutical and Sun Pharma have mutually agreed to terminate their merger agreement, announced in August 2012, reports CNBC-TV18's Archana Shukla.

Both the companies have agreed that they will mutually terminate the merger agreement. Dispute over valuing the 33.3 percent stake remaining in Taro for minority shareholders has been the reason for a termination of this agreement.

After issuing a press statement in an analyst call, Sun Pharma Managing Director Dilip Shanghvi has also said that at USD 39.5 a share, he felt it was a fair valuation for Taro Pharmaceutical. However, the minority shareholders were looking at inching it upwards of USD 39.5 which Sun Pharma was unwilling to do. This is the reason why they decided to ask the special committee which was setup to look into this takeover to mutually terminate this agreement that they have.

Minority shareholders had been against the offer and had opposed the initial offer which was at USD 24.5 a share. They said it is not a fair value and in May of 2012 special committee had rejected Sun’s offer. In August they revised the offer and brought up to USD 39.5 a share for 33.3 percent stake at Taro where they would have shelled out about USD 590 million to acquire that much stake.

Even then minority shareholders like Raging Capital, Grand Slam Asset Management had been opposed to this offer and they had been saying that since Taro contributes over a third to Sun Pharma's sales and profits this is really not the fair valuation. If we see currently Taro shares are trading at USD 50.55 a share which means it has moved up with the impending Sun Pharma's offer. Right now it stands cancelled, although Sun Pharma says the running of Taro Pharmaceutical will continue as it has been.

Dilip Shanghvi, CMD, Sun Pharma  explained in the conference call, “Sun Pharma and Taro announced the termination of the merger agreement pursuant to which shares owned by Taro’s public shareholders would have been bought at a price of USD 39.5 per share. Sun Pharma has been considering the reaction of Taro's shareholders to the proposed buyout and concluded that Taro's shareholders would be unwilling to approve the merger unless the price was increased substantially. Hence Sun Pharma has decided that it would not be in the best interest of Sun Pharma and its shareholders to do so. So, Sun Pharma requested that the special committee agree to terminate the merger agreement and they have agreed to do so.”

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