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Sun Pharma In The News

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Sun to shine brighter

 

Sun Pharmaceutical Industries has finally managed to acquire the Israel-based generic major, Taro Pharmaceutical. The last hurdle for the takeover was finally cleared last month by the Israeli Supreme Court which ruled in favour of Sun. It supported the bid of the Indian com'pany to acquire the outstanding shares of Taro. This, along with the ruling passed by the US dis'trict court last year, enabled Sun to go ahead with its open offer in mid-September.
 
Following the closure of the mandatory offer, Sun announced the completion of the deal as also the settlement of all outstanding litigation with the Levitt and Moross family. The original agreement was signed way back in May 2007.
 
Sun, through its subsidiaries, now hold 48.7 per cent of the economic interest in Taro and a controlling voting interest of 65.8 per cent. Following the settlement the board members of the family have resigned paving the way for new directors to be inducted by Sun. Dilip Shanghvi, cmd Sun Pharma has been inducted as the chairman on Taro's board and Ilan Leviteh as a new director on Taro. "Tara not only adds $360 million to revenue, but offers us the opportunity to grow its business of 147 andas in the US," says Shanghvi. The other board members on the board are Sudhir Valia, Aalok Shanghvi and Hasmukh Shah. Commenting on the completion of the deal Dilip Sanghvi said that Sun would build on Taro's market presence in the US, Israel and Canada by increasing production and investing in r&d in the company. Sun had demerged its research arm and spun it into a separate listed entity, Sun Pharmaceuti'cal Advanced Research Company, enjoying a market cap of Rs l,900 crore on the bse. Analysts feel that at a later date the r&d divisions of the various companies could be merged.
 
Taro's products are sold through prescrip'tion as also over the counter. The company reported a gross profit of $108 million and a net profit of $29 million on a net sales of $187 million for the first half of 2010. While this is similar to the performance recorded in the comparable period in the earlier year, the net debt of Taro has declined to $21 million.
 
The shareholders who were sceptical about the merger have apparently veered around to the enormous potential Taro could offer in increasing Sun's global footprint besides enhancing its product portfolio. Share prices of Sun touched an all time high of Rs 2,002 on 29 September with the markets valuing the company at a little under Rs 42,000 crore. This is considerably higher than Cipla (Rs 25,500 crore) Ranbaxy (Rs 23,400 crore) and Glaxo (Rs 19,000 crore). Its net profit margins of over 42 per cent are also comparable with any global majors. Besides news of the acquisition the decision of Sun Pharma to split its Rs 5 shares into five shares of Rs 1 each has also endeared the shares to investors who expect further liquidity to improve its valuations. Currently promoters hold 63 per cent and financial institutions around 20 per cent in India's largest pharmaceutical company. The acquisition of Taro could lead to a further re-rating.