Auxilium Pharmaceuticals Inc. said Thursday that it plans to combine with Canadian eye drug maker QLT Inc. in an all-stock deal worth about $851 million.
The deal, which is expected to close in the fourth quarter, helps Auxilium cut its tax rate and diversify its offerings. The company mainly makes drugs for men, including treatments for erectile dysfunction and low testosterone.
The companies are characterizing the deal as a merger, and the deal is structured so that QLT is technically the acquiring company. Auxilium shareholders will receive 3.1359 QLT shares for each Auxilium share they own. Auxilium shareholders will own 76 percent of the combined company and QLT shareholders will own the rest.
QLT will be renamed New Auxilium. The combined company will be run by Auxilium's current executives and will keep its corporate offices in Chesterbrook, Pennsylvania, but will remain incorporated in QLT's home of British Columbia, Canada. Two of QLT's board members will join Auxilium's board.
By incorporating in Canada, the company limits its exposure to higher U.S. corporate tax rates. The deal will help Auxilium cut its tax rate from more than 30 percent to the mid-20 percent range, and maybe even lower, the company said in a presentation.
Representatives from Auxilium did not respond to requests for comment.
Auxilium shares slipped 8 cents to $21.15 in morning trading Thursday. QLT shares rose $1.05, or 19.5 percent, to $6.45.