Hospira, Danone in talks for $5-billion inversion deal

Danone's medical nutrition unit operates the Nutricia brand, which sells baby formula for infants with certain allergies and conditions

Hospira, a Midwestern pharmaceutical and medical device maker, is in talks to pay about $5 billion for the medical nutrition business of the French consumer group Danone, a person briefed on the matter said.

The deal, if completed, would allow Hospira to reincorporate overseas in a so-called inversion, lowering its tax rate and freeing its foreign cash.

Hospira, based in Lake Forest, Illinois, has a market value of $8.6 billion and makes a range of drugs, pumps and software for the medical industry. The person briefed on the negotiations said they were continuing and could fail. The Financial Times on Sunday reported on the talks.

The rush of inversions is drawing scrutiny from federal regulators, who are concerned about the erosion of the tax base. On Friday, President Obama called on Congress to pass a law that would at least temporarily halt inversions, while a comprehensive corporate tax overhaul is pursued.

But advisors on Wall Street see little chance of any new legislation soon, and predict several more inversions will be announced this year. While most of the deals involve an American company taking full control of a foreign competitor and then relocating, new twists are emerging.

If completed, Hospira's deal with Danone could be considered a "spinversion," in which a foreign company spins off a unit to an American buyer, allowing it to undertake an inversion.

Recent examples of the practice include Mylan's acquisition of a division of Abbott Laboratories, and Salix Pharmaceuticals' deal to merge with Cosmo Technologies, the Irish unit of Cosmo Pharmaceuticals of Italy. Both of those deals will allow the American companies to move their domiciles to Europe.

Danone has been trying to sell its medical nutrition business for months, and had talked with Nestle. It was not clear if Danone was still in talks with other companies, or if Hospira was zeroing in on a deal to move abroad.

©2014 The New York Times News Service