Deals and IPOs

Tax inversion deal collapses: Will others follow suit?

John Lamb | Photodisc | Getty Images

A planned $2.7 billion deal between pharma companies Salix and Cosmo, motivated in part by the opportunity to do a tax inversion, has fallen through.

"There has been a change in the environment after we struck the deal," Alessandro Della Cha, chief executive of Cosmo, told CNBC in a phone call.

"The (U.S.) administration has taken steps to make inversions more difficult and to make it harder to extract the benefits."

Lew's tax inversion move: The deals which might suffer

This follows attempts by the U.S. government to crack down on tax inversion, after a wave of mergers and acquisitions this year, particularly in the pharmaceuticals sector, were partly motivated by tax reasons. U.S. behemoths from Burger King to Pfizer are trying to cut down their tax bill by moving their headquarters overseas.

The "changed political environment" in the U.S. was the reason cited by Carolyn Logan, chief executive of Salix, in a statement.


Sec. Lew: More on tax inversion plan soon
VIDEO0:4100:41
Sec. Lew: More on tax inversion plan soon
A Burger King Whopper and French fries are shown in Tiskilwa, Ill.
Will new rules curb all tax inversions? Nah

However, another key factor may be acquisition appetite for Salix itself, a possible target for both Actavis and Allergan – which would suggest that other deals in the sector, such as AbbVie's $54 billion bid for Shire, due to complete by the end of the year, should be safe.

"Some of Salix's shareholders have expressed dissent with a transaction that may have needed 2-3 years to realize value," Della Cha said.

"Salix may have thought it better to go with a quicker result."


Medtronic Chairman and Chief Executive Omar Ishrak.
Capital pains tax: Medtronic inversion ires investors

He was optimistic about the prospects for an independent Cosmo, which is hoping to get approval for a planned new endoscopy product in the U.S. and European Union early next year. Its share price rebounded in trading Friday after the deal failure was announced – in contrast to the usual fall expected when such a deal falls through.

The company will get a $25 million payment from Salix because the deal did not complete.

- By CNBC's Catherine Boyle