Krensavage opposes Sun Pharmaceutical’s bid to take Taro private

As the largest minority shareholder of Taro Pharmaceutical Industries, Krensavage Asset Management opposes Sun Pharmaceutical Industries’s paltry bid to take Taro private. Sun, a 78.5% Taro shareholder, on May 26 offered to acquire the rest of Taro for $38 a share, valuing the company at $1.4B. Sun’s inadequate offer amounts to a 17% discount to the value of Taro’s tangible assets, namely $36 a share of net cash. If Taro liquidated, shareholders could receive more than $45 a share. Taro boasts more than just cash and real estate. The maker of generic creams and ointments generated $2.4 billion of cash in the 10 years ended March 31. Not only is Sun failing to offer a control premium, but it also seemingly ignores Taro’s 22 generic drugs awaiting clearance in the U.S., including four with tentative approvals. With a market value of $31B, Sun can pay more. Sun is offering, net of Taro’s cash, $16M for the roughly 8.1M Taro shares it doesn’t own. Taro’s actions suggest it agrees with our assessment. In December 2019, Taro paid $91 a share to repurchase its stock in a tender offer – nearly two-and-one-half times Sun’s current bid. Sun’s tactics ring familiar. In October 2011, it lowballed Taro’s shareholders with a $24.50-a-share bid. Ten months later, Sun raised its offer more than 60% to $39.50 after a special committee of Taro directors rejected the bid. Sun requires approval of the majority of Taro’s minority shareholders. Unless Sun acknowledges Taro’s value, we refuse to support the transaction.