The Work

June 27, 2008 5:42 PM

A Tough Pill to Swallow: Sun Pharmaceutical's Bid for Taro Turns Hostile

Posted by Jonathan Thrope

June started with the buyout of India's largest pharmaceutical company, and now it's ending with its most valuable drugmaker looking to expand.

Yesterday, Mumbai-based Sun Pharmaceutical Industries made public its plans to launch a hostile bid for Israel-based Taro Pharmaceutical Industries. The bid comes weeks after a 2007 merger agreement between the two companies fell through.

Taro terminated the agreement--with Sun offering $10.25 a share for the Indian company--on May 28, saying in a statement that the deal no longer was in its best interests. This was due in large part to big improvements in Taro's financial outlook. In 2006 it lost $141 million, but in 2007 it made approximately $21.1 million.

The takeover promises to be a drawn-out ordeal, as Sun yesterday filed an action in New York trial court against Taro, asserting fraud and claiming that the merger agreement was not properly terminated.

Taro itself has filed two lawsuits against Sun in Israel. The first, filed immediately after the merger was terminated, seeks a declaratory judgment that should Sun attempt to increase its voting power of Taro above 45 percent, it must follow Israel's special tender offer rules. The second, filed June 15, asserts that Sun has been interfering with Taro's attempted sale of its Irish subsidiary to a group of Irish investors, a deal reached prior to the 2007 merger agreement with Sun.

Taro has turned to David Shapiro of Yigal Arnon & Co. in Israel, as well as a team of lawyers from Skadden, Arps, Slate, Meagher & Flom, including lead partner Jeffrey Tindell, and partners Douglas Kraus, Neil Leff, Seth Jacobson, Steve Sunshine, Sally Thurston, counsel Brian Mohr, and associates Paolo Cioppa, Daniel Fisher, Norah Guequierre, Jeremy Hall, Jennifer Hopkins, Uri Jurist, Matthew Kriegel, and Valarie Merrick.

Aaron Lampert and Yoav Razin of Naschitz, Brandes & Co. in Israel are advising Sun, along with lawyers from Shearman & Sterling, including M&A partners Peter Lyons and Alberto Luzárraga, antitrust partner Kenneth Prince, and tax partner Don Lonczak. Litigation partner Alan Goudiss is handling the case filed in New York trial court.

"I am not surprised at all in respect of the acquisition," says Arnand Pathak of P&A Law Offices in New Delhi--the firm advised Daiichi Sankyo in its $4.6 billion acquisition of India's Ranbaxy. "What is even more interesting, however, is that unlike past acquisitions, the Sun bid for Taro may be hostile....This acquisition represents a new recent trend of Indian entrepreneurs and companies tenaciously and aggressively pursuing global inorganic corporate growth strategies and willing to use litigation as a part of this acquisition strategy."

Elsewhere in the bustling Indian M&A market...

GMR Infrastructure Bulks Up with $1.1 Billion Acquisition of InterGen

White & Case advised Bangalore, India-based  GMR Infrastructure in its acquisition of InterGen, a global power generating firm operating power plants in the United Kingdom, the Netherlands, Mexico, Australia, and the Philippines. GMR paid $1.1 billion to AIG Highstar II and other investment affiliates for a 50 percent stake in the power firm.

As Intergen has $4.3 billion in debt, GMR appears to be placing a value of $6.5 billion on InterGen, according to an article from

Oliver Brahmst led the White & Case team along with Nandan Nelivigi, Sandra Warren, Stuart Caplan, Daniel Kessler, John Kim, Jeannine Acevedo, Johanna Fine, Heather Giannandrea, Raymond Azar, David  Ernst, Kyle  Chorba, Peter  Thieman, Suzanne  Innes-Stubb, Ian Reynolds, Mark Hamilton, and Laura Chang in New York; Manisha More and Mukund Dhar in London; Ariel Ramos, Carlos Mainero, and Hernan Gonzalez-Estrada in Mexico; and David Baker in Sao Paulo.

Sidley Austin acted as Highstar's council.

Idea Cellular Purchases Stake in Spice Communications

Idea Cellular increased the number of Indian subscribers by a sixth in a $757 million purchase of Spice Communications. The deal adds 4.5 million mobile phone customers to India's largest GSM mobile services operator, according to an article from Bloomberg. As part of the deal, Idea will sell 15 percent of its stake to Telekom Malaysia International for roughly $2 billion.

Yesterday, Bloomberg reported that TM International's stocks had fallen on the Malaysian stock market, amid worries that the $2 billion amount was too high. The purchase gives TM International a 19 percent stake in the merged Idea and Spice entity, which will have 30.4 million subscribers in India.

Bharucha & Partners of India advised Idea while Norton Rose and Mumbai-based Crawford Bayley provided counsel to TM International. No leads yet as to who is representing Spice. 

Spice joins the ranks of Evergrowths, Usha Martins, and Fascels among stand-alone Indian phone operators that have been acquired in recent years, according to an editorial in the Business Standard. 

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