The two companies announced a definitive merger agreement Tuesday after the bell, just hours before Salix's investor day planned for Wednesday in New York.
Raleigh, N.C.-based Salix would become a wholly owned subsidiary of Cosmo Technologies Ltd. Cosmo Tech is a subsidiary of Cosmo Pharmaceuticals and is domiciled in Ireland.
The new company would be called Salix Pharmaceuticals plc and trade on the Nasdaq exchange.
Under the agreement, Salix shareholders would own slightly less than 80% of the ordinary shares of the combined company and Cosmo would own slightly more than 20%.
Both companies develop drugs to treat gastrointestinal tract diseases. The acquisition would boost Salix's pipeline to nine candidates from six. The merger would also eliminate about $25 million in royalties Salix would have had to pay Cosmo for ulcer drug Ulceris, which Salix had licensed under an earlier, separate deal.
The deal would be dilutive in the near-term to Salix, but the company would make up for that as its tax rate is lowered from the "high 30's to the low 20's," over the next few years, president and CEO Carolyn Logan said in a same-day conference call with investors.
Salix executives said the deal is expected to close toward the end of the fourth quarter and be modestly accretive to the company's earnings per share in 2016 and increasingly accretive thereafter.
Leerink analyst Jason Gerberry said in a note Wednesday, "This deal was not about generating near-term accretion but more about setting up a more favorable long-term tax structure." Salix would save about $50 million in tax synergies for the first year, Gerberry noted. He pegged Cosmo Tech's value at about $2.6 billion.