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Healthcare

UPDATE 1-India's Sun completes Taro buy, shares hit record high

* Raises stake in Taro to 48.7 pct; total cost $144 mln

* Taro to help expand Sun’s presence in U.S., Canada, Israel (Recasts with shares, adds analyst’s comments)

NEW DELHI/BANGALORE, Sept 22 (Reuters) - Shares in Sun Pharmaceutical Industries SUN.BO rallied to an all-time high on Wednesday after the top valued Indian drugmaker said it had completed acquisition of a controlling stake in Taro Pharmaceutical Industries Ltd TAROF.PK.

The purchase of Taro after a protracted legal battle will help Sun expand its generic offerings in the United States, Canada and Israel, the company said.

Mumbai-based Sun has paid about $39 million for the founding families’ 12.7 percent stake, taking its shareholding in Taro to 48.7 percent at a total investment of $144 million, Sun’s spokeswoman said.

Sun and its units had entered into a definitive agreement in 2007 to acquire Taro in a $454 million deal, that included debt and valued Taro’s equity at $230 million. But Israel-based Taro terminated the deal citing low valuation.

Earlier this month, it won a favourable Israel court ruling that allowed Sun to exercise an option to buy shares owned by Taro’s founding shareholders, the Levitt and Moros families, at $7.75 each.

Sun’s units have increased their economic interest in Taro to 48.7 percent and their voting rights to 65.8 percent, the company said in a statement dated Sept. 21, adding the parties had settled all outstanding litigations among themselves.

“We intend to build on Taro’s market presence in U.S., Israel and Canada and its expertise in dermatology and pediatrics, along with specialty and generic pharmaceuticals, and over-the-counter products,” Chairman Dilip Shanghvi, who would also serve as chairman of the board of Taro, said in the statement.

Taro has factories in Canada and Israel that manufacture topical creams and ointments, liquids, capsules and tablets.

Sun shares rose as much as 3.1 percent to a record 1,984.70 rupees in a subdued Mumbai market .BSESN.

Ranjit Kapadia, vice president, institutional research at HDFC Securities, said the rise was a knee-jerk reaction to the news as the acquisition had already been priced in.

“Taro is a good company with a good pipeline of products. But there is no upside immediately for Sun,” said Kapadia, who has a neutral rating on the stock.

For the six months ended June, Taro said its preliminary net profit grew 24 percent to $29 million on sales of $187 million.

In a separate statement, Taro said its current board members were resigning and that appointees of Sun would become directors of Taro, effective immediately. [ID:nWNAB8063]

Taro shares closed up 0.25 percent at $12.25 in the United States on Tuesday. ($1 = 45.5 rupees) (Reporting by Devidutta Tripathy and Bharghavi Nagaraju; Editing by Ranjit Gangadharan)

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