Sun Pharma Raises Offer Price For Acquisition Of Taro Pharma; How Are The New Prices Impacting The Stock?

Sun Pharma, India's leading pharmaceutical giant, has raised prices to acquire the remaining shares of its US-based subsidiary, Taro Pharma. The company revised its offer price to $43 per share in cash, a notable increase from the initial proposal of $38 per share, according to an official exchange filing on Tuesday.

Sun Pharma's board had previously expressed a non-binding interest in May to increase its stake in Taro to 100%, with the deal pegged at nearly $300 million. Since that proposal, Taro's shares have surged by 29%, closing Monday's trading session at Sun Pharma's earlier offer price of $38 per share.

The revised offer sparked a positive response in the market, with Taro Pharma's shares soaring by 8.6% during extended trading in the US on Monday. Currently, Sun Pharma holds a substantial 78.48% stake in Taro. The proposed acquisition is part of Sun Pharma's larger strategy, mirroring a similar initiative undertaken a decade ago. If successful, Sun Pharma intends to delist Taro from the New York Stock Exchange (NYSE).

In Tuesday's exchange filing, Sun Pharma revealed that the special committee overseeing the transaction has tentatively agreed to the revised proposal. Negotiations are underway to finalize the terms for a definitive agreement. However, Sun Pharma has cautioned that there is no guarantee that a definitive agreement will be reached or that the revised proposal will be consummated.

The revised proposal remains contingent on further corporate approval, ongoing negotiations, and satisfaction of customary conditions. This includes gaining approval from Taro's shareholders, who hold the majority vote, excluding Sun Pharma and its affiliates.

Sun Pharma's proposed transaction structure involves a reverse triangular merger. To execute this, the company plans to establish a wholly-owned subsidiary in the form of a Special Purpose Vehicle (SPV). This SPV will then enter into a merger agreement with Taro, facilitating the consolidation of the two entities.

In today's session, Sun Pharma shares were seen trading with cuts of nearly 2% at 1,217.5 per share as of 2:30 pm on NSE. In the year 2023, the company's shares have experienced a 22% increase.