India: M&A Lab: Sun Pharma - Taro Pharma Dissection

Last Updated: 31 July 2019
Article by Abir Roy, Sambhav Ranka and Nishchal Joshipura


This is one scuffle which has rocked the two crown establishments in pharma space and has taken them through a roller coaster ride. The battalion of group companies for one of India's leading drug maker Sun Pharmaceutical Industries Limited would have swiftly expanded to include another gigantic drug making company of Israel, Taro Pharmaceutical Industries Limited. At the outset of entering into a concord for a friendly merger between Sun Pharmaceutical Industries Limited (India) and Taro Pharmaceuticals Industries Limited (Israel) (the proposed transaction), none of the parties would have contemplated that they would end up battling in courts or trying to settle the disputes through mediation. Manifestly, what was supposed to be the second largest outbound acquisition by an Indian company in the pharma space is now into disputed waters.

This M&A Lab probes the commercial, legal, tax and regulatory aspects of the proposed transaction between Sun Pharmaceutical Industries Limited and Taro Pharmaceuticals Industries Limited.


Sun India Group

Sun Pharmaceutical Industries Limited (Sun India) - India: Sun India is an internationally integrated specialty pharmaceutical company which manufactures and markets a large number of pharmaceutical formulations as branded generics as well as generics in India, USA and several other markets across the world. Sun India is a listed company on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Alkaloida Chemical Company Exclusive Group Limited (Alkaloida) - Hungary: ICN Hungary (renamed as Alkaloida) was acquired by Sun India from Valeant Pharmaceuticals in 2005. Alkaloida is an indirect wholly owned subsidiary of Sun India.

Aditya Acquisition Company Limited (Aditya) - Israel: Aditya is a wholly owned subsidiary of Alkaloida and was incorporated in Israel solely for the purpose of entering into the merger agreement and merge into Taro Pharmaceuticals Industries Limited.

Sun Pharmaceutical Industries Inc. (Sun USA) - Michigan, USA: Sun USA is a wholly owned subsidiary of Sun India. It has plants in Ohio and Cranbury. Its products are distributed and sold by Caraco Pharmaceutical Laboratories incorporated in Detroit, which is one of Sun India's group companies.

Sun Development Corporation (SDC) - New York, USA: It is a wholly owned subsidiary of Sun USA and was incorporated solely for the purpose of entering into the USA Merger Agreement in USA.

Taro Israel Group

Taro Pharmaceuticals Industries Limited (Taro Israel) - Israel: Taro Israel is a science based multinational pharmaceutical company incorporated and operating in Israel. It operates principally through the following entities (i) Taro Israel (ii) Taro Pharmaceuticals U.S.A., Inc. and (iii) Taro Pharmaceuticals Inc., Canada.

Taro Pharmaceuticals U.S.A., Inc. (Taro USA) - New York, USA: Taro USA is the principal operating subsidiary of Taro Israel in USA. It markets a broad range of prescription and over-the-counter products in the USA. It accounts for around 80% of Taro Israel's global sales.

Taro Development Corporation (TDC) - New York, USA: TDC is a private company under the control of Barrie Levitt, M.D. (Director and Chairman of the Board of Directors), Daniel Moros, M.D. (Director and ViceChairman of the Board of Directors) and members of their families.


Proposed Scheme of Merger

To get a full control over Taro Israel and TDC, the parties (as mentioned below) entered into certain agreements for the purpose of facilitation of the acquisition of Taro Israel by Alkaloida in Israel and the acquisition of TDC by Sun USA in USA. Following agreements were entered into between Sun India group and Taro Israel group initially:

Merger Agreement between Alkaloida, Aditya and Taro Israel (Israel Merger Agreement) Sun India, through its wholly owned indirect subsidiary, Alkaloida and Aditya (wholly owned subsidiary of Alkaloida) entered into an agreement of merger on May 18, 2007 with Taro Israel to effect a reverse triangular merger of Aditya into Taro Israel, upon consummation of which Aditya would cease to exist and Taro Israel would become a wholly-owned subsidiary of Alkaloida.

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