Print“The new corporate structure greatly enhances our ability to compete for licensing deals and acquisitions, and improves the economics of future business development opportunities for Salix, says Carolyn Logan, CEO of Salix.”
Salix Pharmaceuticals agreed to merge with Cosmo Technologies in an all stock transaction valued at $2.7 billion that will allow the U.S. specialty pharmaceutical to move to Ireland and reduce its tax bill. It is the latest tax inversion deal, following on the heels of several unsuccessful attempts by Big Pharma to use their foreign revenue reserves to move their headquarters to countries with more favorable corporate tax laws.
North Carolina-based Salix Pharmaceuticals will merge with the Irish subsidiary of Italian specialty pharmaceutical Cosmo, to form Salix Pharmaceuticals, plc in an all-stock transaction. Salix’ shareholders will own just under 80 percent ownership of the new company with Cosmo owning the rest.
Besides reducing its tax bill, Salix gains U.S. patents for three Cosmo products including Uceris, a new treatment for ulcerative colitis, for which it had marketing rights through its $2.6 billion acquisition of Santarus in late 2013. Salix also gained rights to an experimental antibiotic and an experimental dye for detecting pre-cancerous lesions in the colon.
Salix will also have the right of first negotiation for any gastrointestinal products Cosmo seeks to market in the United States. Cosmo also agrees not to compete directly with the newly merged entity in the gastrointestinal space in the United States. Publicly traded Cosmo is entitled to designate one director to serve on the board of Salix Pharmaceuticals, plc.
The transaction is expected to be modestly accretive to Salix’s earnings per share in 2016 and increasingly accretive thereafter. It is expected to close in the fourth quarter of 2014.
While the deal enhances Salix’s position in the gastrointestinal space in the United States and adds complementary products to its pipeline, it also enhances its acquisition strategy and increases its competitive positioning for future M&A and product licensing efforts.
“Combining with Cosmo Tech makes tremendous strategic and financial sense for us as it further strengthens and consolidates our position as a leader in acquiring, developing and marketing products to treat gastrointestinal disease and disorders,” says Carolyn Logan, president and CEO of Salix. “Uceris is an important product in our portfolio and this transaction will improve its profitability as well as that of Salix as a whole. The new corporate structure greatly enhances our ability to compete for licensing deals and acquisitions, and improves the economics of future business development opportunities for Salix.”
Logan says the deal is “an evolutionary step” to creating value and bolstering its competitive position in the marketplace, “all within an efficient corporate structure that should increase our profitability and accelerate our long term growth.”
Salix’s merger with Cosmo Technologies is the latest in a growing list tax inversion deals by American drug and device makers seeking to use their offshore cash and decrease their tax burden. Medical device maker Medtronic, based in Minneapolis is buying Irish device maker Covidien for $42.6 billion and moving its headquarters to Dublin. Pfizer failed in its $117 billion takeover attempt for AstraZeneca and AbbVie has put forth its fourth offer to Ireland-domiciled Shire for up to $51 billion, in part to move its headquarters outside the United States.
July 10, 2014
http://www.burrillreport.com/article-salix_to_merge_with_cosmo_tech_in_tax_inversion_deal.html
