MIRA INFORM REPORT
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Report Date : |
14.12.2011 |
IDENTIFICATION DETAILS
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Name : |
TARO RESEARCH INSTITUTE LTD. |
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Formerly Known As : |
TARO-VIT RESEARCH INSTITUTE (1990) LTD |
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Registered Office : |
P.O. Box 10347, Haifa (26110), Italy House, Euro Park, Yakum Business Park, Yakum 60972 |
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Country : |
Israel |
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Financials (as on) : |
30.09.2011 |
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Date of Incorporation : |
17.03.1988 |
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Legal Form : |
Private Limited Company |
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Line of Business : |
Subject operate as Research and Development
company of the Taro Pharmaceutical Group |
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No. of Employees
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125 persons |
RATING & COMMENTS
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MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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Status : |
Satisfactory |
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Payment
Behaviour : |
No Complaints |
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Litigation : |
Clear |
NOTES :
Any query related to this report can be made
on e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – September 30th, 2011
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Country Name |
Previous Rating (30.06.2011) |
Current Rating (30.09.2011) |
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Israel |
a2 |
a2 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
Company name & address
TARO RESEARCH
INSTITUTE LTD.
Telephone 972
9 971 18 00
Fax 972 9 955 74 43
P.O. Box 10347, Haifa (26110)
Italy House, Euro Park
Yakum Business Park
YAKUM 60972 ISRAEL
HISTORY & LEGAL FORMATION
A private limited company, incorporated as per file No. 51-128263-4 on
the 17.03.1988, as a subsidiary of TARO PHARMACEUTICAL INDUSTRIES LTD.,
established in 1959.
Originally registered under the name GAVRIA INESTMENTS LTD., which
changed to TARO-VIT RESEARCH INSTITUTE (1990) LTD. on the 06.03.1992, which
changed to the present name on the 21.08.1994.
SHARE CAPITAL
Authorized share capital NIS 10,000.00, divided into -
10,000 ordinary
shares of NIS 1.00 each,
of which 1,000 shares amounting to NIS 1,000.00 were issued.
SHAREHOLDERS
Subject is fully
owned by TARO PHARMACEUTICAL INDUSTRIES LTD. (hereinafter TARO), a public
limited company whose shares are traded on the "Pink Sheets" List of
the OTHER OTC Stock Exchange (Pink Sheets), U.S.A (symbol: TAROF), controlled
(66.3%) by SUN PHARMACEUTICAL INDUSTRIES
LTD., of India, a publicly traded company on the Bombay Stock Exchange.
In September 2010 came to an end a 3-years battle over the control in
TARO, after the Court ruled in favor of SUN over the founding shareholders
Levitt and Moros families. The affair started in May 2007, when Indian
international pharmaceuticals corporation, SUN PHARMACEUTICAL
INDUSTRIES, acquired the control in TARO in consideration of US$ 454 million
(partly cash, partly for covering TARO's debts) from the Levitt and Moros
families (controlled by Dr. Barrie Levitt and Dr. Daniel Moros) - see more
below.
DIRECTORS
According to the Registrar of Companies, registered directors are the
following: Dr. Barrie Levitt, Dr. Daniel Moros, Shmuel Rubinstein (former General Manager of TARO),
Daniel Moran, Arthur Rainse, Dr. Gad
Keren, Richard Gilis, Barnie Levitt, Avraham Yaacobi, Dr. Micha Friedman,
Yehiel Goldberg, Edmond Sinnenblick, Hershel Hertzog, Howard Rottman, Amichai
Friman.
However, a/m list was valid prior to the final takeover by SUN during
2010 2nd half. Since then, TARO's board and management was changed,
there we assume that in practice subject's as well.
Parent company TARO PHARMACEUTICAL INDUSTRIES is headed by Dilip Shanghvi, the Chairman, and Jim Kedrowski, Interim
CEO. (Note: no one from a/m directors list does not appear in TARO's current
Board's list).
Presently, TARO and subject does not have a general manager.
BUSINESS
Subject operates as the Research and Development company of the TARO
PHARMACEUTICAL Group, manufacturers, developers, exporters and markets of
pharmaceuticals (generic and branded pharmaceuticals, both prescription and
OTC, including tablets, capsules, injectables, suspensions, solutions, creams
and ointments). TARO produces more than 190 pharmaceutical products.
Subject is engaged in R&D of proprietary
pharmaceuticals and delivery systems, including a novel formulation of
"Ovide" and products utilizing the "NonSpil" delivery
system, as well as organic and steroid chemistry, where programs have enabled
them to synthesize the active ingredients in many of their products.
95% of TARO Group's sales are worldwide, 5% in Israel.
Operating from rented premises, on an area of 1,700 sq. meters in
Euro-Park, Italy House, Yakum Business Park, Yakum, a locality south of Netanya.
TARO Group's headquarters are also located at the same address, on an
additional space. TARO Group also operates from an owned premises (plant, labs
and warehouses – though not serving subject itself) on an area of 34,000
sq. meters in 14, Hakitor Street, Industrial Zone, Haifa Bay, Haifa (subject's
registered address), and branches abroad.
Having 125 employees in subject and 1,214 employees serving the TARO
Group as of end of 2010 (of which 648 employees in Israel).
MEANS
TARO's net R&D
expenses increased US$3.1 million, or 9.3%, in 2010 compared to the previous
year. R&D expenses equaled 9.3% of sales in 2010 and 9.4% of sales in 2009.
The decrease in R&D expenses as a percentage of sales was the result of a
combination of the reduction of clinical studies and bonuses coupled with the
change in the foreign exchange rate. The majority of the R&D investment was
focused on our core business, including our generic pipeline, and the remainder
was focused on our proprietary pipeline, which included filing fees for an NDA
of one of TARO's products.
Financial data is included in the consolidated B/S of parent company,
TARO PHARMACEUTICAL INDUSTRIES LTD., which shows:
US$
(thousands)
31.12.2010 30.09.2011
ASSETS
Current assets
Cash and cash equivalents 54,144 161,510
Short term bank deposits & marketable securities 34,693 47,530
Accounts receivable-trade 73,406 102,660
Other receivables, prepaid expenses & others 49,685 83,648
Inventories 83,709 92,883
295,637 488,231
Long-term receivables and
other assets 30,663 25,881
Property, plant and equipment, net 163,596 154,565
Other assets 66,546 45,239
556,442 713,916
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LIABILITIES
Current
liabilities 129,786 173,006
Long-term debt, net of current maturities 42,143 37,950
Equity 384,513 502,960
556,442 713,916
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Parent TARO’s current market value US$ 1.12 billion.
In June 2011 SUN announced it is going to invest some US$ 100 million in expanding
and upgrading its facilities worldwide, including in TARO.
There are no charges registered on the company's assets.
SALES
TARO
PHARMACEUTICAL INDUSTRIES LTD.
US$
(thousands)
Year
ended 31.12
2010 2009 2008
Sales, net 392,535 355,936 327,351
Gross profit 233,377 208,845 187,841
Operating income 86,465 71,835 54,215
Income before income
taxes 75,380 58,808 56,438
Net income 64,551 116,751 30,521
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TARO consolidated sales for the first 9 months of 2011 were US$
357,563,000 (23.3% over 2010), making a gross profit of US$ 223,476,000, an
operating income of US$ 121,019,000, and a net income of US$ 120,280,000.
OTHER COMPANIES
· TARO PHARMACEUTICAL INDUSTRIES LTD., parent company, its other significant subsidiaries (all 100% owned):
· TARO PHARMACEUTICALS USA INC., U.S.A.
· TARO PHARMACEUTICALS INC., Canada
· TARO PHARMACEUTICAL NORTH AMERICA INC, Cayman Islands
· TARO PHARMACEUTICAL EUROPE B.V., the Netherlands
· TARO INTERNATIONAL LTD.
BANKERS
Bank Leumi Le’Israel Ltd., Tel Aviv Central Branch (No. 800), Tel Aviv,
account No. 406600/28.
A check with the
Central Banks' database did not reveal any negative information regarding
subject's a/m account.
CHARACTER AND REPUTATION
Nothing
unfavorable learned.
TARO is the 3rd largest pharmaceutical companies in Israel
(after TEVA and PERRIGO ISRAEL). TARO is a veteran company and has been
enjoying good reputation.
After years of
continuous growth, TARO suffered
a major set-back in Spring 2004, after severe irregularities in its financial
reports were revealed concerning inventories evaluation, leading to a long
turmoil, which also harmed TARO in
several aspects, including financial.
During 2006 TARO encountered financial difficulties and liquidity
distress (TARO operated under the
warning of a "going concern" for a certain period), mainly connected to the accounting turmoil (regarding
inventory calculations), which also led
to senior management shocks and resignations.
As a result, TARO
Group went through streamlining measures and re-organization process, including
dismissals and real estate properties realization.
In December 2006
TARO's shares were removed from the Nasdaq Global Select Market to the traded
on the "Pink Sheets" list (the Over-The-Counter Bulletin Board),
after failing to meet the SEC regulations (TARO published its audited financial statements for the three
years ended December 31, 2006, which include restated financial statements for
2004-5-6, only in April 2010).
In May 2007 TARO entered into a merger agreement
for its acquisition by SUN PHARMACEUTICAL
INDUSTRIES for US$230 million in cash and in addition US$224 million
from SUN to cover debts of TARO to
their banks, institutional investors and bonds holders. The total enterprise
value of the transaction was US$454 million. In addition, SUN fueled an
immediate sum of US$41 million of interim equity financing to TARO, which solved immediate debt
problem (payments to their bond's holders). In
July 2007 SUN fueled further US$ 18 million into TARO, realizing part of the option
given to them in th emerger agreement (option for 3 years).
SUN in an
international company based in India, one of the largest pharmaceutical
companies in India. It is a public company whose shares are traded on the
Bombay Stock Exchange, with current market value of
INR 530.53 billion.
Following the
deal, a major dispute erupted between the parties, accompanied by lawsuits and
counter-lawsuits, some continue to-date and fierce power struggle, which also
effects TARO current operations
(including millions of US$ costs for TARO’s
CPAs and lawyers).
In May 2008 TARO’s Board unanimously voted to terminate Merger Agreement from May 2007 with SUN,
claiming mainly that the deal does not reflect TARO’s real value, but a well much
lower value. SUN persisted its efforts to complete the deal as planned and
realize its option to acquire Levitt
and Moros shares, leading to a continuous
process of bids from each party, which were unsuccessful. In Summer 2008 the
District Court ruled that the merger is valid. TARO, then backed by TEMPLETON, resisted. The District Court rejected TARO’s request and TARO appealed to
the Supreme Court (in the middle the matter went to an arbitrator but returned
to the Supreme Court in March 2009 after arbitration efforts failed).
A major turn in the power struggle over TARO occurred in December 2009,
as the TEMPLETON Fund (an institutional minority
shareholder in TARO) who
backed the Levitt and Moros families,
shifted its support to SUN. The legal struggle finally ended with the
Supreme Court ruling in favor of SUN, and Levitt and Moros had to transfer their shares to SUN based on the original
agreement (much lower company value than the current value at that date). SUN
paid US$ 37 million for their 12% in capital share (and 33% of voting shares
without return), thus reaching control in TARO. In November 2010 SUN paid TEMPLETON US$ 82 million for further 12% (reaching 65.2% in
subject).
In the legal
aspect, after resolving the power struggle issue in September 2010, there is
nothing detrimental on TARO. TARO also settled class action motions that were
filed due to the said affairs.
In October 2011
SUN made a purchasing offer for the remaining of TARO's shares held by the
public (33.7%), in view of merging it into SUN. In December 2011 TARO appointed
CITIGROUP as financial adviser in connection with SUN's Proposal.
SUMMARY
Good for trade
engagements.
Maximum unsecured
credit recommended several US$ millions.
FOREIGN EXCHANGE RATES
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Currency |
Unit
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Indian Rupees |
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US Dollar |
1 |
Rs.53.40 |
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UK Pound |
1 |
Rs.83.32 |
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Euro |
1 |
Rs.70.44 |
RATING EXPLANATIONS
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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56-70 |
A |
Financial & operational base are regarded healthy. General unfavourable
factors will not cause fatal effect. Satisfactory capability for payment of
interest and principal sums |
Fairly Large |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
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11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with full
security |
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<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
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NB |
New Business |
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This score serves as a reference to assess SC’s credit risk and
to set the amount of credit to be extended. It is calculated from a composite
of weighted scores obtained from each of the major sections of this report. The
assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.