Sun Pharmaceutical Industries Ltd, together with its subsidiaries, has signed definitive agreements to acquire Taro Pharmaceutical Industries Ltd, a Pink Sheets multinational generic manufacturer.

The all-cash deal is subject to shareholder approval and requisite regulatory clearances.

Sun Pharma will fund the $454-million acquisition through internal accruals and proceeds from its earlier $350-million FCCB. The acquisition includes refinancing of $224 million of Taro''s net debt along with acquiring Taro''s equity for $230 million or $7.75 per share, which is at a 27 per cent premium to its 18 May, 2007, closing price of $6.10.

In addition, to providing immediate liquidity for Taro, sun will provide interim financing to the extent of $45 million.

Dilip Shanghvi, chairman and managing director, Sun Pharmaceuticals, stated, "We look forward to working with Taro and its employees going forward. This is a good opportunity for Sun and Taro to work together to create increasing value and add a complimentary multinational organization to Sun''s business. We intend to build on Taro''s expertise in dermatology and paediatrics, along with specialty and generic pharmaceuticals, and over-the-counter products. With the addition of 170 talented scientists to our team we look forward to increasing number of product filings of higher complexity."

Taro has established subsidiaries, manufacturing and products across the US, Israel, Canada. Its North American operations account for over 90 per cent of the company''s sales.

Taro operates mainly through three entities: Taro Pharmaceutical Industries Ltd., or Taro Israel, and two of its subsidiaries, Taro Pharmaceuticals Inc., or Taro Canada, and Taro U.S.A. Taro, headquartered in Haifa, Israel, was established in 1959 and has been listed since 1961 in the US.

Taro had recently reported 2005 sales of $298 million and profit of $5.7 million. Its financial statements for 2003 and 2004 were required to be restated by the audit committee of its board of directors in view of errors in estimating the chargebacks from wholesalers and the actual inventory in the drug distribution chain. On 20 March, 2007, Taro had reported that it expected to report a substantial loss for the year ended 31 December, 2006.

Taro has a strong franchise in dermatology and topical products, in addition to product baskets in cardiovascular, neuropsychiatric and anti-inflammatory therapeutic categories. Taro US has more than 190 ANDA drug approvals in the US alone. One NDA as well as 26 ANDAs are awaiting approval with the USFDA.

The company has large, world class sites with necessary regulatory approvals in Canada and Israel that manufactures topical creams and ointments, liquids, capsules and tablets dosage forms which complements our current manufacturing and development capabilities in the US.

Additionally Taro manufactures APIs, including complex chemistry and steroids that are made at its site in Israel an integral component in being vertically integrated on difficult to replicate products. Over $225 million have been invested by Taro in capex in the last three years which provides Sun Pharma with additional capabilities.

At 12-16 per cent of sales, Taro has invested over $190 million in R&D so far. Among active projects in drug discovery, is its lead molecule T-2000, which is a non-sedating barbiturate that is being developed for essential tremors. T-2000 is in additional phase II studies in Canada. This is in addition to projects in formulation development for ANDA filing and process chemistry for APIs organic and steroid chemistry. A novel formulation of Ovide® a lice treatment which is another interesting product in their portfolio of proprietary products.

On 10 May, 2007, Franklin Advisers, Inc. and Templeton Assets Management Ltd, the beneficial owners of approximately 9 per cent of Taro''s ordinary shares, filed a motion in Tel-Aviv District Court to prevent what they allege to be discrimination against minority shareholders. On 19 May, 2007, Franklin Advisers and Templeton filed a request with the court for a temporary injunction to prevent Taro from entering into any transaction which might result in discrimination against minority public shareholders.

The motion is scheduled to be heard on May 21, 2007.

Sun Pharma says that it believes that the proceedings initiated by Franklin Advisers and Templeton are without merit and are detrimental to the best interests of shareholders and Taro and along with the US firm it "intends to contest the action vigorously".