U.S.-based Salix Pharmaceuticals Ltd. has announced plans to merge with a unit of Italian company Cosmo Pharmaceuticals, Cosmo Technologies Ltd (Cosmo Tech). The newly formed company will be headquartered in Ireland, where Cosmo Tech is based.

When the deal is completed Salix will become a wholly-owned subsidiary of Cosmo Tech, which will change its name to Salix Pharmaceuticals plc. Shareholders of Salix are expected to own just under 80 percent of the ordinary shares of the newly formed company, with Cosmo Tech owning just over 20 percent, the two companies said in a joint statement.

Under the terms of the agreement Cosmo Tech will appoint one director to the board of directors of Salix Pharmaceuticals, while Salix will obtain the rights over Cosmo Tech's U.S. patents for bacterial infection treatment drug rifamycin MMX, methylene blue MMX, which is used as a complementary treatment for patients with colonoscopy, and ulcerative colitis therapy product Uceris. The transaction is expected to close in the final quarter of 2014.

According to industry analysts, the move is yet another example of a strategic inversion, in which a U.S.-based company moves overseas for tax purposes. The Wall Street Journal quoted Salix's chief executive officer Carolyn Logan as saying that tax savings were among the key benefits of the deal. Speaking during a conference call, Logan said that the company expected to see its tax bill reduced by between 20 percent and 30 percent after the merger.