Close on the heels of Taro board?s rejection of Sun Pharma?s tender offer, Templeton Asset Management Ltd, a minority shareholder in Taro, rejected Sun?s tender offer for Taro shares. Mark Mobius, executive chairman of Templeton Asset Management, said that the offer was not acceptable to them as it undervalued Taro Pharmaceuticals. Last year too, Templeton had opposed the Sun-Taro deal saying it was undervalued.
Mobius pointed out that in the view of the Templeton Emerging Markets Team, Sun’s offer does not reflect the current value, since the terms of the offer were communicated and determined over 12 months ago. ?In the meantime, Taro reported a strong operational turnaround and a sharp improvement of its earnings, as well as its balance sheet situation, which now continues to show momentum well into 2008. As we have expressed on multiple occasions, we believe $7.75 substantially undervalues the shares,” he added.
Last year, while signing the deal, a motion had been filed by Franklin Advisers and Templeton Assets Management Ltd, to prevent Taro from entering into any transaction, which was rejected by Tel-Aviv District Court later. Later, in February this year, Sun had purchased an additional 9.4% stake from Brandes Investment Partners LP for $10.25 per share, in Taro, taking its stake in Taro up to 34.4% from the earlier 25%.
Mobius went on to indicate that in making its decision, the Templeton Emerging Markets Team also reviewed the analyses and recommendation of independent advisory services. He noted that both Glass Lewis and RiskMetrics Group recommended shareholders to reject the merger agreement over 12 months ago. Mobius said, ?Since the terms of the tender offer are the same as those of the merger reported on by those firms, we believed that the analyses were relevant to our decision.?
Tender offer that was commenced by Sun?s subsidiary, Alkaloida for all outstanding ordinary shares of Taro for $ 7.75 per share in cash, is scheduled to expire on July 28, 2008. At present, Sun Pharma holds about 36% in Taro, and by exercising its option, it would get 12% of the economic share, taking its share up to 48%.
Mobius pointed out that in Taro’s statement of June 19, 2008, the company said that there had been a “dramatic financial turnaround” with net income of approximately $21.1 million in 2007. Taro had also underlined the high value of its new product pipeline. Mobius also said that in reaching this conclusion, the Templeton Emerging Markets Team reviewed the recent fairness opinion of Merrill Lynch which described the offer as “financially inadequate, from a financial point of view.”