Horizon seeks to acquire Vidara for $660 million

Deal would be structured as a reverse merger and domicile Horizon in Ireland

Jeffrey Bouley
DEERFIELD, Ill.—Looking to become yet another in a line of U.S. companies to benefit from better corporate tax rates in Ireland, Horizon Pharma Inc. announced this spring that it has entered into a definitive agreement with Dublin-based Vidara Therapeutics International Ltd. under which Horizon Pharma will acquire Vidara through a reverse merger for stock and cash valued at approximately $660 million.
 
The deal is expected to close by the middle of the year and result in a company name Horizon Pharma plc, and the under the reverse merger structure of the deal, the company will be organized under the laws of Ireland with a portfolio of four products marketed primarily in the United States. However, while the headquarters will officially shift to Ireland, the company will be listed in the United States. The proposed transaction has been unanimously approved by both companies’ boards of directors.
 
The transaction will be carried out such that 74 percent of Horizon Pharma plc’s ordinary shares to be exchanged for Horizon Pharma Inc.’s common shares, with Horizon surviving the merger. The shareholders of Vidara will retain approximately 26 percent of Horizon Pharma plc and receive $200 million in cash, subject to certain adjustments.
 
Aside from the financial benefits of being domiciled in Ireland, the deal will give Horizon accesss to Vidara's drug Actimmune— a bioengineered form of interferon gamma-1b, a protein that acts as a biologic response modifier—which is used for the treatment of chronic granulomatous disease and severe, malignant osteopetrosis. The drug is indicated for reducing the frequency and severity of serious infections in the former disease and delaying time to disease progression in patients for the latter disease.
 
This would add to Horizon's portfolio of drugs, which are right now focused on therapies for arthritis, pain and inflammatory diseases.
 
“The addition of Actimmune complements our commercial business model focused on targeted promotion to primary care physicians and specialists,” said Timothy P. Walbert, chairman, president and CEO of  Horizon Pharma. “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 shareholder value.”
 
Walbert would be chairman, president and CEO of Horizon Pharma plc, and current officers of Horizon Pharma Inc. would be officers of Horizon Pharma plc. According to Horizon, Vidara executives would join Horizon Pharma plc in “important leadership and management roles within the combined company.”
 
The tax issue is important for Horizon because, as RF Lafferty & Co. analyst Difei Yang told Reuters, Horizon has reported that it will turn profitable this year (after posting losses since going public in 2011), and going forward from that standpoint, the tax rate becomes a very important consideration and thus this deal makes a lot of sense for Horizon.
 
The deal also makes sense for Vidara and its drug Actimmune, which Yang described as “underpromoted”—a situation that could change with Horizon’s marketing muscle behind the drug, which Vidara bought in 2012 and which generated $58.9 million in sales for the company in 2013. Cowen and Co. analyst Edward Nash has estimated Actimmune’s market potential at between $150 million to $200 million.
 
In a conference call about the deal, Walbert indicated that the combined company will explore new indications for Actimmune, but refrained from providing further details.
 
Zack Investment Research was positive about the deal, writing in a note that, “The addition of Actimmune will be a perfect fit for Horizon Pharma’s portfolio which includes Duexis, Vimovo and Rayos … The proposed deal will significantly increase Horizon Pharma’s revenue base. While Horizon Pharma recorded revenues of $74 million in 2013, the combined company is expected to generate pro-forma 2014 revenues in the range of $250 million to 265 million. The acquisition of Vidara will also be accretive to Horizon Pharma’s pro forma earnings in 2014.
 
“Additionally, Horizon Pharma plc will enjoy a lower tax rate, which is expected to be in the low 20s. This compares favorably with a tax rate in the high 30s expected for the legacy Horizon Pharma.”

Jeffrey Bouley

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