Reverse merger of two public companies?
I was reading a bit into Valeant Pharmaceuticals and their previous merger with Biovail. A lot of news are talking about a "reverse merger" in this case "because Biovail keeps 50.5% of the shares." Now, I don't get what this is supposed to mean. When I read about reverse mergers, it is basically a fast and cheap way to take a private company public. But both Valeant and Biovail were previously public, and I though the only reason why Biovail acquired Valeant and not vice versa was for the reason that they can get low Canadian tax?
Can someone help me understand this correctly? Maybe its just the term "reverse merger" thats confusing me.
Yes, the tax implications and part of the reason it is structured that way because the new company would ostensibly be domiciled in Canada and thus the lower tax rate. I believe the only reason this is really a 'reverse merger' is that Biovail takes on the name of the company they are taking over, even though their shareholders would have a majority in the new combined company. I believe that is what is going on, although I haven't read up much on reverse mergers.
I think you're thinking of a Inversion deal. An Inversion is a type of merger where a company either buys out or is bought by a foreign owned company in order to take advantage of the foreign tax rate. Bioavail was the acquiring company even though the company kept the Valeant name. Medtronic is another great example. Medtronic acquired Covidien, an Irish medical device company, and reincorporated under Irish Law as Medtronic PLC with a listing on the NYSE as MDT in order to pay a significantly reduced tax burden.
Confused by this too. Was thinking similar to Frieds and thought you might have confused it for n tax inversion trade/deal like Warner Chilcott/Actavis.
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