Sun Pharmaceutical Industries Ltd.'s definitive merger agreement to fully acquire Taro Pharmaceutical Industries Ltd. adds value for the Indian drugmaker, according to analysts.
Sun Pharma, which owns 78.48% of Taro currently, has agreed to acquire all of the outstanding ordinary shares of Taro not currently held by it. The company will acquire the remaining 21.52% of outstanding shares for $43 per share, totaling $347.7 million, or Rs 2,891.8 crore, in a cash deal, according to an exchange filing on Thursday.
The price has been revised since its original offer in May, when Sun Pharma proposed to acquire the outstanding shares at $38 per share, indicating a 13% premium to the initial purchase price.
As of September 2023, Taro has current assets of $1.34 billion, out of which cash and short-term bank deposits total $389 million. Its revenue stood at Rs 4,604 crore in the last financial year, in comparison to Rs 4,181 crore in fiscal 2022.
"Post-acquisition, Sun Pharma will have complete autonomy to utilise $1.3 billion," Abdulkader Puranwala, pharma analyst at ICICI Securities Ltd., told NDTV Profit. "This is while attributing Taro an enterprise value of around $1.6 billion, which is reasonable. So, overall, it is an accretive transaction."
Currently, Sun Pharma can use Taro's cash only for the latter's business because of its minority shareholding. After the complete acquisition, it will be able to utilise the cash on Taro's balance sheet and put it to the best use for the group as a whole, according to Vishal Manchanda of Systematix Corporate Services Ltd.
The acquisition will also give Sun Pharma the opportunity to restructure and leverage synergies in the US. Its track record with acquisitions and deals has been good, the pharma analyst said. "So overall, this seems to be a good proposition for the company."
The previous offer in May had met with the backlash of minority investors, who had found the offer price low. The revised offer is still subject to the approval of the shareholders of Taro, including the majority of its minority shareholders participating in the vote, and other statutory approvals.
Shares of Sun Pharma were trading 1.84% higher at Rs 1,322.90 apiece on the NSE compared to a 0.5% decline in the benchmark Nifty 50 at 12:51 p.m.
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