Taro Sells Out Its Shareholders In Takeover Deal

May.21.07 | About: Taro Pharmaceutical (TARO)

Taro Pharmaceutical Industries (TAROF.pk) announced today that the company has been sold to India’s Sun Pharmaceutical Industries for $7.75 a share, a 27% premium to Friday’s closing price. Sun will also take over Taro’s debt of $454 million. Sounds good? Not so much. The price is 15% lower than Taro stock price was two months ago when they announced that they were pursuing a potential sale. The company has been disappointing investors for years, and this is just another feather in their cap.

It was just a few weeks ago that Morningstar analyst Brian Laegeler wrote a piece about how he thinks the company is currently worth $13 a share and has potential to reach $20. Not only he was duped like the rest of us, but Brandes Investment Partners purchased a lot of shares in the $9 range, and of course Franklin Advisors and Templeton Asset Management, which together own 9% of Taro at prices around $13, aren’t exactly doing summersaults.

Will Franklin Resources be able to come in and save the day? Three weeks ago, they filed a motion in Israel seeking appointment of a special interim manager to review Taro’s efforts in identifying strategic alternatives. Over the weekend, they filed for an injunction to prevent Taro from entering into any deals. The motion is to be heard in the next day or two.

With the deal subject to approval of Taro shareholders, and the potential for the courts to step in and halt the proceedings, there is potential for the deal to get blocked, so maybe shareholders will one day be able to realize the true value of their holdings.

TAROF.PK 1-yr chart:

taro chart