Sometimes something is so good that when you buy it, you immediately want to buy all of it. That’s what happened to Taro Pharmaceuticals (NASDAQ:TARO) as it found itself the subject of new buyout reports. This sent Taro stock screaming upward by a double-digit factor in Tuesday afternoon’s trading. As to who will be doing the buying, it’s a face that’s already so familiar to Taro that it’s the current largest shareholder.
That’s right: current majority shareholder Sun Pharmaceutical Industries—who already owns 78% of Taro Pharmaceuticals—has offered up a proposal that allows it to buy the remaining 22%. The proposal isn’t binding, but under the terms of said proposal, it plans to offer up $38 per share for all outstanding Taro Pharmaceutical stock. That’s a hefty premium against the Friday closing price of $29.39.
Reports from Fierce Pharma note that such a move would require Sun to shell out a combined total of $307 million to pick up the remaining stock. That might not be such a bad deal, though, as Taro has assets of $1.3 billion, including cash and short-term deposits of $274 million. Moreover, during its 2023 fiscal year, Taro pulled in $573 million, so the remaining cost to completely acquire Taro wouldn’t even be a full year’s worth of revenue. Systematix Corporate Service analyst Vishal Manchanda, however, believes that the move would be a smart one for Sun Pharma thanks to what we’ve already seen Sun do in the market.
Hedge funds, meanwhile, seem to believe that Taro Pharmaceuticals can do no wrong. Their overall confidence in Taro is considered “Positive,” and just last quarter, hedge funds picked up an extra 56,900 shares. This is actually the sixth consecutive quarter that hedge funds have increased their position, though it may be the last if Sun buys them out.
