Subject: ACC
Krensavage Asset Management Opposes Sun's Lowball Bid for Taro
NEW YORK, July 19, 2023 /PRNewswire/ -- As the largest minority shareholder1 of Taro Pharmaceutical Industries Ltd. (NYSE: TARO), Krensavage Asset Management LLC opposes Sun Pharmaceutical Industries Ltd.'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 $1.4 billion.
Sun's inadequate offer amounts to a 17% discount to the value of Taro's tangible assets2, namely $36 a share of net cash3. 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 $31 billion4, Sun can pay more. Sun is offering, net of Taro's cash, $16 million for the roughly 8.1 million Taro shares it doesn't own5.
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.
Notes:
1Krensavage Asset Management's 641,910 shares of Taro on March 31 make it Taro's No. 2 shareholder, according to Bloomberg.
2Tangible assets equal assets of $2.1 billion on March 31 minus goodwill of $17 million and liabilities of $405 million.
3Krensavage defines Taro's net cash as current assets of $1.3 billion plus long-term marketable securities of $405 million minus current liabilities of $386 million.
4Bloomberg lists Sun's closing market cap on July 13 as $31.4 billion.
5Taro had 37,584,631 shares outstanding as of March 31. Sun controlled 29,497,813 shares of Taro according to Sun's May 26 13D/A.
Contact:
David W. Walbert
Senior Analyst
Krensavage Asset Management LLC
Office: (212) 706-0589
SOURCE Krensavage Asset Management LLC
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