Taro minority investors reject higher offer, Sun Pharma down

Shares of Sun Pharmaceutical Industries, the country’s largest drug maker by market capitalisation,is lower on the bourses this morning after reports that minority shareholders of Israel’s Taro have rejected the Indian company’s sweetened offer of $39.5 per share for the balance equity.

The stock is 2.60 percent lower at Rs 666.15 on the BSE, while the Sensex is down 0.17 percent at 17603.47.

[caption id=“attachment_417483” align=“alignleft” width=“380”]  On Monday Sun Pharmaceutical Industries hiked its offer by nearly 60 percent to mop up the remaining shares in Israeli generic-drugs maker Taro Pharmaceutical Industries.[/caption]

Sun Pharma holds 66 percent stake in Taro and plans to de-list Taro from the New York Stock Exchange, if the revised offer succeeds. Taro has been one of the major contributors to Sun Pharma’s revenues

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On Monday, Sun Pharmaceutical Industries increased its offer by nearly 60 percent to mop up the remaining shares in Israeli generic-drugs maker Taro Pharmaceutical Industries. Sun will fork out an additional $600 million (nearly Rs 3325 crore) for the remaining shares, if the deal goes through**.**

However, a report in the Economic Times today stated that Grand Slam Management, a minority shareholder has rejected Sun Pharma’s buyout price and also urged other minority stakeholders to follow suit. The deal can be blocked with more than 50 percent of outstanding minority shares.

“We believe this offer to be wholly inadequate and intend to vote our shares against this transaction,” ET said, quoting the Grand Slam letter to the shareholders.

Brokerage Nirmal Bang is bearish on Sun Pharma and has a sell rating on the stock with a target of Rs 638 as it feels FY13 growth drivers - Lipodox sales, Taro and rupee fall- are not sustainable.

“We believe uncertainty over continuation of Lipodox sales (Johnson & Johnson had earlier indicated resumption of Doxil supplies by 4QCY12 and price hikes in its subsidiary, Taro (depending on incremental competition) leave little room for error given Sun’s high valuation (23.7xFY14E EPS) and a rather ordinary product pipeline (barring anti-diabetic drug Prandin, we do not see any other exciting product).”