Sun rejects Guggenheim's $215 million offer for Taro stake

The battle for control of Israel-based Taro Pharmaceutical Industries Ltd has taken a new twist with Sun Pharmaceutical Industries Ltd, one of India's largest generic drug makers, rejecting buyout firm Guggenheim Partners' offer to buy out its stake in Taro.

New York-based Guggenheim Partners, a privately held diversified financial services firm that has been hired by Taro to advise it on finding a solution to the three-year bitter takeover battle for the company by Sun, had late last week offered Sun to buy out its 36 per cent stake in Taro for $215 million.

In its offer letter, Alan Schwartz, the executive chairman of Guggenheim Securities, said: "We believe this transaction would be viewed positively by Sun's shareholders, as it will allow Sun to monetise an illiquid, minority position, while realising a profit of over $140 million, more than double the size of its initial investment."

Sun shot back by saying that its aim was to take control of Taro as per the merger agreement Taro had signed with it in May 2007. "Therefore, we have to regret your offer," wrote Shailesh Desai, wholetime director of Sun, in a letter to Guggenheim.

Sun entered into a merger agreement with Taro in May 2007 following a board-approved competitive auction process, at a time when Taro had admitted to facing a dire financial crisis, where it was on the verge of liquidation. (See: Sun Pharmaceutical to acquire Taro Pharma for $454 million)

Sun agreed in good faith to provide Taro a lifeline of almost $60 million cash in exchange for the option to purchase the Taro shares held by the Levitt/Moros family at $7.75 per share if the merger were not consummated.