Thursday, November 1, 2012

TARO - More good news

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2 significant news relevant to TARO happened this last week which will affect valuation of TARO shares. We have informed the special committee and the board of this significant development. Meanwhile as expected by most shareholders , TARO is on target to post yearly EBIDTA of $320m. This  is 53m higher than their low-ball EBIDTA estimates of $267m provided to Citi by Taro management (on June 14th 20120) for valuation of TARO shares. 

The ratification of EU-Israel trade is expected to increase the accessibility of TARO pharmaceuticals to EU markets. Right now, TARO's sales in EU is negligible.
This trade agreement will remove technical barriers to trade, cutting manufacturers' costs and enabling them to get their products to market faster

2)  Watson Pharma confirmed their expectations on the annual Synergy savings of $300m/year on it's Actavis acquisition.
This piece of news along with the Valeant-Medicis acquisition (anticipated $225 in annual synergy savings) would serve to indicate the value proposition the TARO acquisition could provide for a strategic acquirer like SUN. The special committee should take cognizance of this in evaluating fair value of TARO shares. For instance, if TARO acquisition results in $200m in synergy savings, this is equivalent to incremental value of ~$53 per TARO share above and beyond the intrinsic market value of TARO.
Watson continues to expect $300 million in annual cost synergy savings from the Actavis acquisition within three years. These synergies are comprised of SG&A, R&D, corporate, purchasing and raw material supply savings.
Expanded Global Geographic Footprint
The combined company has operations in more than 60 countries, with top 10 positions in more than 33 markets including the U.S., U.K., Canada, Australia, Nordics and Russia. With this global footprint, the combined company has an extensive platform for strong, future organic growth. The strongest growth regions for the new company will be the U.S., Central and Eastern Europe and Russia and in Southeast Asia and Australia. The Company is also the fastest growing generic pharmaceutical company in Western Europe, where growth is outpacing the overall market. The combined company will be geographically diverse, with approximately 40 percent of its revenues coming from outside of the U.S. 
Expanded Global Supply Chain
The Company has an expansive, diversified global supply chain with various technological capabilities, including the ability to manufacture more than 40 billion dosages worldwide. The combined company has the expertise to develop solid dosage, modified release, patch, gel, liquid, semi-solid and injectable products for all of its global markets.

3) Meanwhile, TARO continues to shine and is well on its way to hit $320m in EBIDTA.

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