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Mergers, Acquisitions and Takeovers Case Study

Case Title:

India’s Sun Pharma and Israeli's Taro: Failed Merger

Publication Year : 2010

Authors: B Gopal, S Korra, J Babu

Industry: Healthcare

Region:India, Israel, US

Case Code: MAA0192IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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On 22 May 2007, Sun Pharmaceuticals, India's largest pharmaceutical company signed a $454 million merger deal with Israeli major, Taro Pharmaceuticals, which included an 'option agreement'. The agreement granted an option by Taro's Chairman, Barrie Levitt for Sun to acquire all the shares of Taro in case the merger failed. This merger deal priced Taro's equity at $7.75 per share as against its closing price of $6.10 on 18 May 2007. Since Taro was in a financial crisis at the end of 2006, the merger offer from Sun came as a rescue which could improve its financial position. Sun Pharmaceuticals provided $224 million in net debt to Taro, in addition to interim financing of $45 million. For Sun, this opportunity provided increased capabilities and market reach in the US. Despite the prospects from the merger deal, Taro called off the deal in May 2008 stating that Sun's offer of $7.75 per share was financially inadequate and no longer in the best interests of the company and its shareholders. During the course of the merger process, Sun faced difficulties with Taro's decision to postpone and thwart the merger deal. It also faced resistance from the disinterested minority shareholders of Taro. Moreover, on 21 June 2008, Taro filed a case in the Israeli court to prevent Sun from taking over at the revised price of $10.25 per share. A few days later, Sun too, filed a case against Taro in the supreme court of New York for terminating the merger deal. Though the Israeli district court gave a verdict in favour of Sun, it is left to Taro to surrender its stake to Sun or to appeal in the Israeli supreme court for final judgement. The case deals with the allegations and counter-allegations that happened in the Sun-Taro merger deal.

Pedagogical Objectives:

  • To the challenges in cross-border merger and acquisitions
  • To the key aspects of the Sun-Taro Merger deal.
  • To the synergy between Sun and Taro.
  • To the events that led the merger to culminate.

Keywords : Global pharmaceutical industry, Sun Pharmaceuticals Ltd, Taro Pharmaceuticals, India, US, Israel, Cross-border mergers and acquisitions, Merger agreement, Tender offer, Minority shareholders, Share price, Sun-Taro merger, Franklin Templeton Asset Management, Market share, Merrill Lynch

Contents : 
Sun and Taro
The Big Four M&As
Taro’s Shareholding Pattern
Analysis of Sun-Taro Merger Agreement
Number of All Deals by Region
Top Five M&A Deals in the Global Pharmaceutical Industry
Sun Pharma’s Performance in India

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