Taro to vote on Sun Pharma merger soon
After being postponed twice over, Taro Pharmaceutical has said that it expects to hold its shareholder meeting to vote on the proposed merger with Sun Pharmaceuticals during the first three months of 2008.
This takes Sun Pharma a step closer to sealing the $454-million proposal that it had made in May to acquire Taro. Also, Taro has provided its unaudited results for the nine months up to September 2007 and financial performance for 2006, another niggling shareholder concern.
Taro’s management had recently told shareholders that it would hold its annual general meeting on December 31, to discuss among other things, the company’s consolidated financial statements for the year ended 2006. But to vote on the Sun Pharma proposal, Taro management said, it would hold an extraordinary general meeting (EGM).
Reason for delay
Touted to be the second largest overseas acquisition by an Indian drug company, Sun Pharma’s proposal to acquire Taro ran into delays after minority shareholders Franklin Advisers and Templeton alleged discrimination against them and took legal recourse. Another Taro shareholder, San-Diego-based Brandes Investment Partners also reportedly expressed disappointment with Sun Pharma’s offer price of $7.75 per share.
Taro had earlier hoped to schedule the shareholder meeting by end-November, after having postponed it in July to September, and then again indefinitely. In the meanwhile, the several court motions filed by some of the institutional shareholders were rejected, Taro said in July.
Sun Pharma at present holds 25 per cent equity in Taro. Franklin Templeton and Brandes, together hold 16 per cent in Taro, a source familiar with the development told Business Line. Since May, Sun Pharma has made equity investments in Taro totalling approximately $59 million, Taro said.
In its statement on Thursday, Taro said that it estimated net sales of approximately $232 million, gross profit of approximately $126 million, or 54 per cent of sales, and net income of approximately $14 million, for the nine months ended September 2007.
In this period, there was also an approximately $10 million one-time charge and non-recurring expense, including significantly higher professional fees due to a restatement of 2003 and 2004 results, a related investigation and the proposed transaction with Sun Pharma, the company said.
On its financial statement for the year ended December 2006, Taro said that it had been delayed because it was reviewing the adequacy of estimates for accruals recorded in 2005 and prior years for sales returns, chargebacks, rebates and administrative fees. This review is still in progress, and the eventual outcome cannot be predicted with any certainty at this time.
Taro currently estimates its net sales to be approximately $184 million for the year ended December 31, 2006, resulting in a net loss for the year of approximately $141 million. The results differed from Taro’s earlier estimates due to increased amounts of asset impairments. Taro currently estimates its non-cash asset impairments at approximately $38 million during 2006. Taro attributed its 2006 loss to different factors, including sales-related issues and one-time legal and accounting charges associated with the 2003 and 2004 restatement and an independent investigation in 2006.
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