India’s Sun Pharmaceutical Industries has terminated its agreement to takeover its Israeli unit Taro Pharmaceutical Industries in a deal worth $571m.

The companies announced in a statement that they “mutually agreed” to end the deal, announced in August 2012, for which shareholders of Taro would have received $39.50 per share.

“Each of Sun Pharma and Taro (at the direction of the Special Committee) agreed that terminating the merger agreement was in the best interest of the respective companies and shareholders,” the firms said.

Media reports are suggesting that Taro’s shareholders have chosen to wait for a better takeover offer, given its improving performance.

IDFC Securities analyst Nitin Agarwal told Bloomberg; “As earnings keep coming in stronger and stronger for Taro, there was obviously a lot of disconnect with the price Sun was willing to offer.

“It was fairly unlikely that the deal would have gone through,” added Agarwal.

Sun Pharma and its affiliates currently own 66% of the outstanding Taro ordinary shares and 100% of Taro’s founders shares, representing approximately 77.5% of the outstanding voting power in Taro.