Salix Pharma Ends Cosmo Deal; Stock Up On Reports Of Talks For Sale To Actavis

(RTTNews) - Salix Pharmaceuticals Ltd. (SLXP) Friday announced that it has mutually agreed to terminate its merger agreement with Italian pharmaceutical firm Cosmo Pharmaceuticals S.p.A., and will make a $25 million payment to Cosmo. Meanwhile, Bloomberg on Thursday reported that Salix is in talks to sell itself to pharmaceutical company Actavis plc (ACT), after it failed to reach a deal with Botox maker Allergan Inc. (ALGN). Salix's shares gained around 5 percent in the after hours trading on Thursday,

It was in In July that Salix agreed to merge with Cosmo's unit Cosmo Technologies Limited, as part of a tax-inversion deal. Tax inversion is the process of moving a company's headquarters overseas to benefit from cheaper tax rates compared to higher tax rates in the U.S.

Salix today said the terms of the termination is effective immediately. Carolyn Logan, President and CEO of Salix stated, "When we announced our agreement to merge with Cosmo Technologies in July we believed the combination would generate significant value for our stockholders through the addition of key products to our development pipeline and a more efficient corporate structure that would enhance our profitability. Since then, however, the changed political environment has created more uncertainty regarding the potential benefits we expected to achieve."

Meanwhile, Cosmo CEO Alessandro Della Cha stated that the termination has no effect on its value creation, and its focus is now on obtaining approval of SIC-8000 and filing Rifamycin SV and Methylene Blue NDA in the next months.

In its report, Bloomberg, citing people with knowledge of the matter, stated that though no deal is imminent, an agreement between Salix and Actavis has become more likely in the past week.

Allergan was in advanced talks to buy Salix in order to fend off a $53 billion hostile bid from Canada-based Valeant Pharmaceuticals Inc. (VRX, VRX.TO). However, reports stated that Allergan's effort to acquire Salix stalled in recent days over valuation concerns.

The drugmakers have been considering a number of combinations recently. Actavis, itself a potential target for Pfizer Inc. (PFE), had also approached Allergan about a deal, reports said.

Salix shares closed Thursday's regular trading at $151.09, down 2.25 percent, and had a market value of $9.84 billion. At the extended trading, shares however, gained $6.91 or 4.57 percent, and traded at $158.

Cosmo shares closed Thursday's trading at 143 Swiss francs, down 8.33 percent.