Salix Pharma scuttles overseas merger with Cosmo Technologies, citing 'political environment'

Salix Pharmaceuticals is scrapping its merger with the subsidiary of an Italian drugmaker after the U.S. created new limitations on the tax benefits of incorporating overseas.

The Raleigh, North Carolina, drugmaker says a transformed political environment has created more uncertainty about the benefits they had expected to achieve from the deal, first announced in July.

Salix Pharmaceuticals Ltd. would have combined with Cosmo Pharmaceuticals, a subsidiary of Cosmo Technologies Ltd., in an all-stock deal that could have lowered its long-term tax rate from the 30 percent range, to a low 20 percent span.

The U.S. Treasury Department announced new regulations last month that limited the benefits of these corporate maneuvers, known as inversions.

Salix will pay Cosmo $25 million to get out of the deal.