Salix Pharmaceuticals (SLXP) to be Acquired by Allergan
Shares of the Salix Pharmaceuticals Inc. (SLXP) were up +12.47 or +7.80 percent to $172.30 per share in this morning's premarket. The stock was up as much as 16 percent in afterhours trading yesterday after news that Allergan Inc. (AGN) was in talks with Salix to take over the company. Salix Pharmaceuticals stock closed at $159.83, down -4.40 or -2.68 percent in Monday's regular trading session.
Irvine, California based Allergan Inc. is a diverse health care company specializing in biologics and pharmaceuticals and best known for being the producer of Botox wrinkle treatments. The company was originally founded 60 years ago as an eye care company and has branched out to include medical aesthetics, neurosciences, breast aesthetics, medical dermatology, and urologics. The company employs 11,400 people in 100 countries around the globe and has a market cap of $50 billion.
The takeover of Salix, which could be formally announced by the end of the week, will act as a poison pill for Allergan, which will effectively fend off a hostile bid from Valeant Pharmaceuticals International (VRX). Valeant, along with Bill Ackman's Pershing Square Capital Management had made a $54 billion bid for Allergan in April, raising the offer twice. The latest offer is for 0.83 shares of Valiant and $72 per share in cash for each Allergan share.
Salix, which has a market capitalization over $10 billion, would have to abandon its own merger with a unit of Italian pharmaceutical company Cosmo Pharmaceuticals SpA. Salix was set to merge with Cosmo's Irish unit in order to move its domicile to Ireland.
Buying an overseas company to establish a domicile there is known as a tax inversion. Ireland's corporate tax rate is 12.5 percent compared to a 35 percent rate in the United States. In addition, Salix was to acquire three gastrointestinal drugs for $27.5 billion in stock from Cosmo.
The potential takeover, which has yet to be formally announced, comes one week after 20 of Salix top investors threatened to vote down the proposed merger with Cosmo. The investors favored the company selling itself to Activis Plc ACT or Allergan over the merger with the Irish unit of Cosmo.
Despite the lack of a formal announcement, Salix stock was up sharply in yesterday's after-market and in today's premarket. Allergan shares are up a fraction before the bell. The deal will be an all cash bid according to unnamed sources, nevertheless, in the absence of a formal announcement, trading in Salix stock has already become volatile. The deal may still fall through however, with the latest news being Bill Ackman threatening legal action against Allergan if it proceeds with the deal.
Other News About Salix Pharmaceuticals
Raleigh's Salix reaches $100 million patent settlement
Company settles with Par Pharmaceuticals in a patent dispute.
Ackman Threatens to Sue if Allergan Proceeds With Salix Deal
Pershing Square and partner Valeant plan to defend their hostile bid.
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