Another tax inversion looming?
30.07.2014 - Rumours have it that French Danone wants to sell its medical nutrition business to US drugmaker Hospira for US$5bn in yet another tax inversion deal.
The Financial Times has reported that, “according to people familiar with the situation”, the two companies have negotiated the deal for several weeks now. Until recently, the French consumer group had more than one suitor – German Fresenius and Swiss Nestlé were also interested in the unit. Danone Medical Nutrition makes specialised nutrition that complements drug therapy or can be given via medical devices, such as Fortimel, Nutrini and Flocare.
It is likely that Illinois-based Hospira is interested in the deal in order to move its tax base to Europe, circumventing the comparatively high corporate tax in the US. Compared to US corporate tax of 40 per cent, France only has a 33 per cent tax rate, while in the UK the rate is as low as 21 per cent. For the tax inversion process to work, Danone would have to first spin off its medical nutrition business.
Hospira is not the only US firm that attempts takeovers in order to move their tax base out of the US: Medical device maker Medtronic has recently bought Irish Covidien, and pharma company Abbvie has successfully wooed UK’s Shire. Drug maker Pfizer also tried a takeover with British-Swedish Astrazeneca, but did not succeed. The growing number of US firms that attempt such inversions has the US government worried. US president Obama criticised the companies on CNBC last week, saying: “For you to continue to benefit from that entire architecture that helps you thrive, but move your technical address simply to avoid paying taxes is neither fair, nor is it something that’s going to be good for the country over the long term.”