Taro and Sun both specialise in generic pharmaceuticals

More than 90% of Taro's sales are in North America and Sun hopes the acquisition will strengthen its own sales there.

India and Israel are big manufacturers of generic drugs, which are treatments whose patents have expired.

The generic drug market is growing at twice the rate of patented drugs as blockbusters lose their protection.

The deal is India's second-largest acquisition in the drugs industry, after the $570m takeover of Germany's Betapharm by Hyderabad-based Dr Reddy's Laboratories last year.

Another generic drug company, Ranbaxy, is one of India's most acquisitive companies, having bought eight rivals last year.

Court ruling

Two of Taro's shareholders, Franklin Advisers and Templeton Asset Management, tried to block the deal.

They went to court in Tel Aviv to seek an injunction on the grounds that the deal was not in the interests of minority shareholders.

But the court decided not to issue the injunction, although there was a deal done with Taro, which agreed to reduce its interim funding.

Sun makes generic drugs specialising in areas such as psychiatry, neurology and cardiology.

Taro specialises in dermatology and paediatrics.