Illinois-based Hospira, Inc. (NYSE:HSP) is said to be in talks with Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN) to buy the French consumer group’s medical nutrition business in a deal that could be worth about $5 billion.
According to reports, Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN), the world’s largest yoghurt-maker by sales, has been working on the sale with the investment bank, JPMorgan Chase & Co. (NYSE:JPM) for some months.
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Hospira Tax inversion
Hospira, Inc. (NYSE:HSP), which had a market value of $8.64 billion at Friday’s market close, could use the deal to redomicile its tax headquarters in France in a deal known as tax inversion.
Tax inversions facilitate U.S. companies in paying lower tax rates by setting up offices in a country with lower rates. Such maneuvers have come under criticism recently, as Senate Democrats are trying to close the tax loophole. In a recent interview, President Obama addressed corporate tax reform and corporate tax inversions. He indicated that he is willing to lower corporate tax alongside closing loopholes, but that he believes the primary goal of tax reform should be to create a fair and predictable system, not simply to lower effective tax rates.
On Thursday, President Obama labeled companies seeking to redomicile their tax bases as “corporate deserters” who were “technically renouncing their US citizenship”.
Hospira, Inc. (NYSE:HSP) and Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN) have been in negotiations for several weeks, and according to people familiar with the developments, the potential cash and stock deal could be worth about $5 billion.
Acquire at least 20%
Inversion deals involve a U.S. company acquiring all or part of a foreign firm. The inversion would require shareholders of the acquired company to receive stock amounting to at least 20% of the resulting entity. This would require Hospira, Inc. (NYSE:HSP), which has a market value of $8.6 billion, to fund a sizable part of any bid for the Danone operation with stock.
Until 2013, Hospira, Inc. (NYSE:HSP) was under the same corporate umbrella as AbbVie Inc (NYSE:ABBV). Earlier this month, in the largest acquisition this year to date, AbbVie Inc announced that it would pay about $54 billion to acquire the specialty biopharmaceutical company Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP).