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Salix Pharmaceuticals drops tax inversion deal amid backlash

Salix Pharmaceuticals drops tax inversion deal amid backlash
Allergan is battling a hostile takeover from Valeant Pharmaceuticals International Inc. (Don Bartletti / Los Angeles Times)

Salix Pharmaceuticals called off its merger with a foreign drug maker Friday, citing the political backlash against tax inversion deals.

The deals—in which a company reincorporates abroad to gain lower taxes—drew fire this summer after several high-profile cases. Last month the Treasury Department imposed new rules to limit the practice.

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With its deal scuttled, Raleigh, N.C.-based Salix is now looking to sell itself to pharmaceutical giant Actavis, Bloomberg News reported, citing unnamed sources.

Such a deal would have wide-ranging implications for Botox maker Allergan. The Irvine company had reportedly sought to acquire Salix to fight off a takeover attempt by Valeant Pharmaceuticals International Inc. of Quebec.

Dublin, Ireland-based Actavis, itself a product of a tax inversion, had also expressed interest in buying Allergan, according to Bloomberg News.

For now, Salix has only announced that its tax inversion deal is off.

Under that agreement, the company would have merged with an Irish-based subsidiary of Italy's Cosmo Pharmaceuticals and moved its headquarters to Ireland, taking advantage of lower tax rates.

On Friday, Salix Chief Executive Carolyn Logan said that when the deal was announced in July the company believed it would boost stockholder value and provide an "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," she said in a statement.

Salix shares rose $1.91, or 1.3%, to $153 in midday trading. Allergan shares climbed $5.80, or 3.3%, to $182.66.

Follow me on Twitter @khouriandrew

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