The latest Senate hearing on the exponential growth of corporate inversions was proven unsuccessful as Congress couldn’t agree on new legislation to curb the phenomenon. Thus, companies continue in search for tax breaks by migrating overseas in droves. Added to the list of possible inversions is the Hospira pharmaceutical company acquisition of Danone’s medical nutrition business for about $5 billion.
Danone is a French consumer group with four business lines: fresh dairy products, early life nutrition, waters, and medical nutrition. Since Hospira is only looking to acquire a division of the business, if the deal were to go through, it would be considered a spinversion.
A spinversion is when a foreign company spins off a portion of their business to allow it to be inverted.
Other examples of American to foreign spinversions are Salix Pharmaceuticals’ merge with the Irish unit of Cosmo Pharmaceuticals of Italy. Another spinversion is Mylan Pharmaceuticals’ acquisition of a division of Abbott Laboratories.
Danone has been interested in selling its medical nutrition business for some time and has had talks with Nestle and the German healthcare group Fresenius. Yet, it is uncertain if Danone is in talks with any other companies besides Hospira at this time.
Acquiring Danone’s medical nutrition business would be idyllic for Hospira on a couple fronts. For starters, Hospira is a pharmaceutical company known for selling injectable and generic medications as well as medical equipment. Adding Danone’s current medical nutrition business would broaden Hospira’s scope as the medical nutrition business is a comparable discipline.
Another advantage to an inversion between Hospira and Danone would be a tax break for Hospira—which is significantly lower in France than the U.S. where corporate tax is 35%.
For Danone, selling the medical nutrition division of their company would allow them to focus on their food and consumer brands the company is more widely known for.
The possible deal looks promising as it would serve as a tremendous benefit to both parties.