Traders Sell Salix Pharma Shares Following Merger News
Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) announced in a press release Tuesday the company has agreed to merge with a unit of Cosmo Pharmaceuticals SpA. The unit will change its name to Salix Pharmaceuticals PLC, which will be just under 80 percent owned by Salix shareholders.
Salix and Cosmo Technologies Ltd., the Cosmo unit, will combine under the accord. Salix shareholders will receive one ordinary share of the new Salix Pharmacuticals PLC. Cosmo will own just over 20 percent of the new entity, which the companies expect to be traded on the NASDAQ Global Select Market.
Under the transaction, Salix's executive team and board will retain their positions at the new Salix Pharmaceuticals PLC while Cosmo will designate an additional board member. The deal is subject to vote by Salix shareholders and U.S. regulatory approval. The companies expect the transaction to close in the fourth quarter.
Salix develops and markets products in the U.S. to treat gastrointestinal disease. The companies said the transaction will add additional products to Salix's offerings.
"Combining with Cosmo Tech makes tremendous strategic and financial sense for us," Carolyn Logan, president and CEO of Salix said in a statement.
Salix will have the first negotiation right related to future gastrointestinal products Cosmo or affiliates want to market in the U.S. and bans Cosmo from competing directly with the new company on such products in the region. Those terms are in effect as long as Cosmo can designate a director at Salix Pharmaceuticals PLC.
After closing, Cosmo will be subject to standstill agreements for "at least 10 years," according to the statement. Alessandro Della Chá, Cosmo's CEO, will be that company's initial designated director at the new entity.
Shares of Salix initially climbed following resumption of trade, but have since sold off. The stock last traded at $130.50, down nearly five percent from Tuesday's closing price.
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