Horizon Pharma Inc (HZNP.O) said it would buy Dublin-based Vidara Therapeutics International Ltd in a reverse merger for $660 million, the latest U.S. company looking to benefit from Ireland's low corporate tax rates.
The company's shares rose 25 percent to a life-high of $18.30 in early trade as the deal also boosts its pipeline.
Horizon CEO Timothy Walbert said on a conference call that the combined company's tax rate would be in the low-20 percent range, or lower, compared to the high-30 percent range it expected earlier.
RF Lafferty & Co analyst Difei Yang said the deal makes sense as Horizon has said it would turn profitable this year.
"From this point forward, tax rate becomes an important consideration," she told Reuters, adding that she expected the rate to fall to a mid-teens percentage in two to three years.
Horizon has been reporting losses since going public in 2011.
The deal adds Vidara's genetic disorder drug Actimmune to Horizon's portfolio of four drugs used to treat different forms of arthritis.
Analyst Difei Yang said Horizon could use its strength in marketing to boost sales of Actimmune, which she said was "underpromoted".
The drug, which was sold to Vidara by Intermune Inc ITMN.O in 2012, generated sales of $58.9 million in 2013.
Cowen and Co analyst Edward Nash said Actimmune had a market potential of about $150 million to $200 million.
Walbert said Horizon would explore additional uses of Actimmune, but did not provide further details.
STOCK AND CASH
Horizon Pharma said on Wednesday the stock-and-cash deal would create a new company, Horizon Pharma Plc, which would be 26 percent owned by Vidara shareholders. They will also receive $200 million in cash.
Privately held Vidara has operations in Ireland and the United States.
The deal is the latest in a series of transactions structured by U.S. pharma companies to take advantage of Ireland's low tax rates.
U.S. drugmaker Perrigo Co Plc (PRGO.N) bought Irish firm Elan ELN.I for $8.6 billion in December. Endo Health Solutions (ENDP.O) acquired Canadian drugmaker Paladin in a deal that created a new holding company based in Ireland that would own both firms.
Horizon Pharma Plc, which will be headed by Horizon CEO Timothy Walbert, is expected to generate pro-forma full-year revenue of $250 million-$265 million.
Horizon said it had secured a $250 million bridge loan funding from Deerfield Management Co LP.
Citigroup Global Markets Inc acted as lead financial adviser to Horizon Pharma and JMP Securities LLC served as co-financial adviser.
KPMG LLP served as Horizon's tax adviser and Cooley LLP and Dublin-based McCann FitzGerald were the legal advisors.
Horizon Pharma's shares were trading up about 17 percent at $17.14 in morning trading. About 8 million shares changed hands by 1050 ET, more than three times their 10-day moving average.
(Reporting by Vrinda Manocha in Bangalore; Editing by Sriraj Kalluvila)