Boston, MA 07/01/2014 (wallstreetpr) – Investigators at Newman Ferrara have announced the investigation of Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL), a U.S. drug company that is planning to merge into a Canadian counterpart known as QLT Inc. (USA) (NASDAQ:QLTI).
The investigators are concerned about whether the board of Auxilium acted fairly in entering and approving a deal with the QLTI. The board of directors is required to act in the best interest of shareholders such that any deal reached should enhance the value of shareholders. However, in the case of a deal with QLTI, the investigators allege that shareholders will end up with an implied value $19.41 per share of Auxilium (NASDAQ:AUXL) stock, yet the stock closed at $21.23 per share on the day before the announcement of the deal.
Furthermore, the investigators claim that the implied value is far below the 52-week high of the stock, which is $32.89 per share.
As such, Newman Ferrara seeks to find out if the board of directors of Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) failed to act fairly as required of it.
Premium Offer
According to the terms of the merger, shareholders of QLTI are poised to get a premium of 25 percent on the price of the company’s stock. However, shareholders of Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) will gain a greater control of the combined company at 76 percent against 24 percent of QLTI shareholders.
The deal allows shareholders of Auxilium (NASDAQ:AUXL) to receive 3.1359 share of QLTI for each Auxilium share that translates into the majority control of the combined entity.
Reincorporating Abroad
Following the merger, the combined company of QLTI and Auxilium (NASDAQ:AUXL) will have its corporate headquarters in Canada. The move implies an inversion whereby U.S. companies are acquiring foreign companies to allow them reincorporate outside the country so as to lower their tax burden.
Analysts believe that the combined company will enjoy tax rates in the mid-20s, which is lower than the 35 percent observed in the U.S.
The move will also allow the Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) to easy use its foreign cash without incurring huge taxes on the same.
