Wednesday, March 21, 2012

Taro pharma's value paradox


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

While I will not argue on valuation of TARO in this post or the market multiple this strong business(unlike traditional generic business) should trade at, or identify it's most comparable peer, look at its impressive 3 year performance.

Taro 3 year performance
Taro's 3 year EBIDTA and Sales growth

Taro was relisted in NYSE on March 23rd. But the open offer from SUN has effectively put a lid on TARO's price. Despite the 12 month performance and strength of TARO's business, market valuation of it's parent SUN, relative valuation of peers like Perrigo,  TARO's special committee continues to "diligently" evaluate $24.5 offer for >3 months now (see link)!  Taro shares have traded >$35 for >2 months now and last traded $39.4 on 03/23...yet the evaluation of $24.5 offer continues. However, please note we are to believe this statement from the above PR: "The Special Committee recognizes its primary objective is to maximize value for the minority shareholders of Taro and will take all steps necessary to ensure this objective is achieved."

Update(04/04)-Note that TARO is trading at ~$41 (04/04), despite the overhang of majority shareholder buy-out. It is very easy to see that TARO's market price would never reflect it's true market value under current circumstances , with the overhang of majority shareholder buyout. A 12-month moratorium on any minority buy-out offer as well as Investor day with full and fair disclosure of it's mid term business and restructuring plan, it's pipeline assets which includes 4 NDA and 24 ANDA (per 10-k), may go a long way in finding the real market price for TARO's shares.



Public letters from Minority Shareholders
ISZO Capital
-> Link
Raging Capital
-> Link
Grandslam Asset Management
-> Link
Permian Investment partners
-> Link

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