Sun gets Taro burn, merger called off

Israel?s Taro Pharmaceutical Industries Ltd on Wednesday said it was terminating a May 2007 merger agreement with Aditya Acquisition Company Ltd., a subsidiary of Sun Pharmaceutical Industries Ltd, ending months of uncertainty, streaked with protests from some Taro shareholder groups.

The difference between the two companies hinged on the merger share price and the financial turnaround that Taro made since the agreement.

Last year, Sun Pharma said its plans to acquire Taro for a total value of $454 million (Rs 1,789 crore), including equity purchase of about $230 million at $7.75 per share in cash, and allowed either party to terminate after December 31, 2007.

Sun has reportedly made equity investments in Taro worth $59 million.

Taro has postponed its important shareholder meetings several times since the merger announcement.

Sun Pharma?s stock closed at Rs 1,466 on the BSE on Wednesday, up 6.61%, as the news of the termination came in after market hours.

A Taro statement said, ?Taro?s board of directors determined that permitting the merger agreement to remain in force is no longer in the best interests of the company. The board determined that the merger agreement had become stale and does not reflect the dramatic operational and financial turnaround that the company has achieved since last year, the future value that the company expects to achieve from the changes made in its business model and the value in its new product pipeline.?

The company also said there were operational constraints in the merger agreement that were interfering with its ability to manage its business for the benefit of all of its stakeholders, and that, ?but for certain of these constraints, Taro?s profitability and cash resources could have been higher today.?

However, all the Sun Pharma would say was that it had received a notice from Taro Pharma for the termination of its merger agreement.