This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Salix Prospects as Takeover Target Debated After Inversion Deal

Stocks in this article: SLXP

NEW YORK (TheStreet) -- Shares of drug maker Salix (SLXP) are falling after the company announced that it had agreed to carry out a merger which is expected to reduce its profits in 2015. However, research firm Piper Jaffray wrote that Salix is still an acquisition target and called the merger "compelling."

WHAT'S NEW: Salix agreed to merge with Ireland-based Cosmo Technologies, a subsidiary of Cosmo Pharmaceuticals, the companies announced last night. The deal will enable Salix to significantly reduce its tax rate by becoming an Irish company. Salix, which sees the deal lowering its effective long-term tax rate from high 30% to low 20%, said it expects the transaction to be "modestly accretive" in 2016 and increasingly accretive thereafter.

ANALYST REACTION: In a note to investors earlier today, Piper Jaffray analyst David Amsellem wrote that Salix is still a takeover target following the merger. Moreover, the merger is compelling, since it would significantly lower the taxes that the company would have to pay on its IBS-D treatment, Xifaxan, assuming that the drug is approved by the FDA, the analyst wrote. The deal could reduce the taxes that Salix would have to pay on its Xifaxan profits by 18 percentage points or more, Amsellem estimated. Furthermore, as a result of the merger, Salix will no longer have to pay Cosmo a royalty on sales of Uceris, an Ulcerative Colitis treatment, Amsellem stated. He kept an Overweight rating on the stock. Taking a somewhat different view was Leerink Swann analyst Jason Gerberry. In the wake of the deal, Salix is unlikely to be acquired in the near-term, the analyst stated. However, Salix could be acquired next year if Congress does not pass legislation that would prevent companies from lowering their tax burden by carrying out M&A with firms located in other countries, the analyst stated. Gerberry kept an Outperform rating on Salix.

PRICE ACTION: In morning trading, Salix sank $5.66, or 4.1%, to $131.61.

Reporting by Larry Ramer.

The Fly provides comprehensive coverage of stock news and Street research and delivers it in real-time. The Fly breaks market-moving news and explains sudden stock movements in a rapid-fire, short-form story format. Follow @theflynews on Twitter. For a free trial, click here.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs