Salix Pharma target raised to $185 at Stifel -- M&A prospects beating out tax inversion oppty
Stifel raises their SLXP tgt to $185 from $155. There have been several developments since announcement of the proposed Cosmo Tech acquisition, giving them pause regarding consummation of the transaction. First, Treasury proposed new regulations in an effort to discourage tax inversions (retroactive to 9/22/14), of which strengthening the "80/20 rule" could directly impact the SLXP-Cosmo merger. Additionally, since August, the potential for SLXP to be a target itself has significantly increased, with possible bids coming from AGN, ACT or others. Based on these developments, we are removing Cosmo from SLXP model for now. Additionally, though they believe SLXP shares are trading at its fundamental value (~$155) they believe the likelihood of a take-out has increased significantly. Assuming a 70% probability of acquisition at a 30% premium (~$200), we raise our price target to $185.