Horizon Pharma Inc. (Nasdaq: HZNP) stock jumped more than 15% today (Wednesday) after it announced it will buy privately held Vidara Therapeutics International Ltd. in a cash and stock deal valued at $660 million.
The Deerfield, Ill.-based specialty pharmaceutical firm said the resulting company, Horizon Pharma PLC, will be 26% owned by shareholders of Vidara, which has operations in Dublin and the United States. Vidara shareholders will also share some $200 million in cash.
Horizon confirmed boards of both companies have unanimously approved the merger, which is expected to close by midyear. The newly combined company will be headed by Horizon Chairman and Chief Executive Officer Timothy P. Walbert. Horizon Pharma PLC is expected to generate full-year revenue of $250 million to $265 million.
The deal adds Vidara's genetic disorder drug Actimmune to Horizon's four drugs used to treat various forms of osteoarthritis and rheumatoid arthritis.
Actimmune is approved by the Food and Drug Administration for use in children and adults with chronic granulomatous disease and severe, malignant osteopetrosis. The treatment is targeted at reducing the frequency and severity of serious infections associated with CGD and for delaying time to disease progression in patients with SMO.
Vidara bought Actimmune from InterMune Inc. (Nasdaq: ITMN) in 2012 for $55 million. Last year, the drug generated $58.9 million in sales.
"The addition of Actimmune complements our commercial business model focused on targeted promotion to primary care physicians and specialists," Walbert said in a statement. "The combined company would have a portfolio of four proprietary products and an international platform that builds on our strategy of organic growth and acquisitions. We look forward to working with the Vidara team to bring our companies together to accelerate the creation of shareholders value."
But there is more Horizon sees ahead - and something that will benefit HZNP stock investors in the long run...
There's Green in Ireland's Tax Structure
Also likely to stoke shareholder value, and what Horizon unquestionably found especially attractive, is the deal allows the Illinois-headquartered company to benefit from Ireland's low corporate tax rates.
Indeed, Ireland has a favorable 12.5% corporate tax rate.
For example, if a U.S. corporation builds a factory or establishes new headquarters in the country and generates $10 million in profit, it pays $1.25 million in Irish tax. That compares to the $3.5 million it would pay in America, where the federal rate is 35%.
Companies are well aware of the benefit. That's why this Horizon deal is the latest in a string of transactions aimed at taking advantage of Ireland's low tax rates.
In November, Endo Health Solutions (Nasdaq: ENDP) bought Canadian drug maker Paladin in a $1.6 billion deal that created a new holding company based in Ireland. In December, U.S. drug maker Perrigo Co. (Nasdaq: PRGO) acquired Dublin-based Elan for $8.8 billion.
This benefit should give HZNP even more reason to hit new highs.
HZNP Stock Has Been on a Tear
Since closing out 2013 at $7.62, Horizon (HZNP) stock has more than doubled.
In a timely move, Cowen & Co. on Monday raised their price target on Horizon from $15 to $17. The upgrade sent HZNP up 6.5% intraday to $14.13. Shares ended the session 5% higher, to close at $13.89.
Wednesday, Horizon shares surged some 20% and cruised past the company's all-time high of $14.75. Intraday, the stock hit a fresh high of $18.30.
At last check, shares were still up today a healthy 16% at $17.10.
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