The string of pharma M&A deals fueled by the lure of cutting taxes continues and Midwest-based Hospira ($HSP) is now said to be about to take the plunge. Its vehicle of choice is the medical nutrition business of France's Danone, which sources say it is negotiating to buy in a deal that could run to $5 billion.
The Financial Times, citing sources, says that Hospira and Danone, which put the business up for sale months ago, have been working on a deal for weeks. Dan Rosenberg, a spokesman for the Lake Forest, IL-based Hospira, said in an email today, "We're always looking at opportunities in the marketplace to drive shareholder value, and assess them based on many strategic and financial considerations. As a matter of course, we do not comment on specific acquisition opportunities or market speculation." A Danone spokesperson declined to comment.
The Danone unit had sales of €328 million (about $440 million) last year, Bloomberg reports. Hospira has its own nutritional business, sales of which are lumped in with large volume intravenous solutions and contract manufacturing. It reported revenues of $473.6 million in 2013 for that category, about 12% of its total. But key to the deal, FT reports, would be Hospira's ability to follow many other U.S. drugmakers who are buying European companies, or units, to take advantage of the so-called "tax-inversion" process.
The tax avoidance loophole got lots of play during Pfizer's ($PFE) protracted but unsuccessful run on the U.K.'s AstraZeneca ($AZN). It figured into AbbVie's ($ABBV) $55 billion deal to buy Ireland's Shire ($SHPG) and the much smaller deal by Salix Pharmaceuticals ($SLXP) of North Carolina to merge with an Ireland-based unit of Cosmo Pharmaceuticals ($COPN).
While cutting taxes can only make shareholders happy, it has raised the ire of President Obama and some U.S. lawmakers who see it draining substantial tax collections from U.S. coffers. Treasury Secretary Jacob Lew this month urged lawmakers to act immediately and approve a bill that could "shut down this abuse of our tax system," looking to close a loophole that has allowed about 50 U.S. firms to reincorporate overseas in the last 10 years. His plan would make any legislation retroactive to May 2014, obviously aimed at trying to stop any rush of additional deals before a new law is passed.
While that could affect a deal by Hospira, The New York Times' blog DealBook reported recently that companies seem unconcerned. That is because they realize the chance of passing significant tax legislation any time soon is highly unlikely.
- here's the Financial Times story (sub. req.)
- more from Bloomberg
- read the DealBook post