PARIS (The Deal) -- America's unloved tax regime may be about to deliver another European takeover with reports suggesting that Lake Forest, Ill.-based Hospira (HSP) is working on an offer worth about $5 billion for Danone's medical nutrition business.
A successful bid by Hospira would net one of Danone's fastest growing and most profitable, albeit small, operations and provide a route for the U.S. group to slash its tax burden by reincorporating its operations in Europe, a process known as inversion.
Hospira could join AbbVie (ABBV) and Medtronic (MDT), which, respectively, agreed to pay $54.7 billion for Ireland's Shire (SHPG) and $43 billion for Covidien (COV), also of Ireland, in deals that are at least partly motivated by inversion, which liberates cash earned, and already taxed, overseas from a second round of taxation when it is repatriated to the U.S. The U.S. corporate tax rate is 35% and the highest in the OECD. That compares with 12.5% in Ireland, 21% in the U.K. and 33.33% in France, according to KPMG LLP figures, suggesting that a Gallic domicile wouldn't be an obvious option for Hospira.
The spate of inversion deals has drawn the ire of the Obama administration, which has called on Congress to close the loophole, potentially be enacting retroactive legislation. "We need to stop companies from renouncing their citizenship just to get out of paying their fair share of taxes," President Obama said on Thursday. "You know some people are calling these companies 'corporate deserters'."