Krensavage Asset Management Opposes Sun's Lowball Bid for Taro

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Jul 19, 2023, 07:00 ET

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

Info@krensavage.com

SOURCE Krensavage Asset Management LLC