Salix calls off Irish-based ‘inversion’ merger

One US pharma company called off it Irish-based “inversion” merger yesterday in response to US Treasury measurers, while another restructured its deal.

Salix Pharmaceuticals Ltd scrapped a deal with Italy's Cosmo Pharmaceuticals SpA that would have allowed it to shift its tax base from the United States to Europe citing a "changed political environment".

Medtronic Inc, the world's biggest maker of heart rhythm devices, said it will borrow $16 billion (€12.7 billion) to finance its deal for Covidien instead of using cash it keeps overseas because of US tax laws.

Avoiding taxes

The Salix deal termination came less than two weeks after the US treasury department took a series of steps to curb “inversion” deals that let companies avoid US taxes by reincorporating abroad.

North Carolina-based Salix, which makes drugs for gastrointestinal disorders, said in July it would merge with Cosmo’s Irish subsidiary. Since then, it has faced pressure from top shareholders to cancel the deal and instead sell itself to a larger drugmaker.

Salix, which would pay Cosmo a break-up fee of $25 million, was among at least 10 US companies to seek inversion this year to cut tax bills and gain access to foreign earnings.

– (Reuters, Bloomberg)