On Friday Sun Pharma made an offer to buyout the remaining shares of Caraco. The offer price of $4.75 is absurdly low, a 5% premium to the closing price on Friday. When was the last time you heard a company taking another company private at a generous premium of 5%?
My investment approach has been to not get involved in situations where I need to prod management or the board to take specific actions. I do not get involved in activist type roles. There are some practical reasons for not doing this. Although in CPD’s case, I did reach out to the IR. I still haven’t heard back from them. For the most part, I will be sticking with my investment approach of not getting involved in company operations.
The offer from Sun Pharma is absurdly low priced. For Caraco, there is not valid reason to go private at this point. The costs for staying public are minimal (I believe the Audit/Attestation fees are less than $100K annually). Caraco is close to getting back into FDA compliance and has no need for urgent capital.
For Sun Pharma, I never understood why they didn’t buy up the minority shareholders when Sun Pharma initially signed the technology transfer agreement. So taking CPD private is likely to be Sun Pharma’s goal for a long time and at the current depressed prices Sun Pharma is getting its best opportunity to do it. When the initial FDA issues appeared with CPD, CPD was trading at a huge discount to today’s market price. Although Sun Pharma couldn’t take it private at that time due to potential lawsuits.
I would expect the independent board members to reject the current Sun Pharma offer as too low. Although Sun Pharma has appointed all the board members at CPD, so there is no guarantee.