Hospira Inc. which is a US-based medical and pharmaceutical device maker, is considering purchasing the medical nutrition business of Danone, the French consumer group for around $5 billion.
If completed, the deal would allow Hospira to reincorporate overseas in a so-called inversion, freeing its offshore cash and lowering its tax rate.
Based in Lake Forest, Illinois, Hospira has a market value of $8.6 billion and the company makes a range of pumps, drugs and software for the medical industry.
The recent rush of inversions is drawing intense scrutiny from federal regulators who are concerned about the erosion of the tax base. Obama, the President of United States, called on Congress to pass a law that would at least temporarily put a stop to inversions, while a more comprehensive overhaul in corporate tax is pursued.
However, advisers on Wall Street see little chance of any new legislation soon, and also predict that several more inversions will be announced this year. Although most of the deals involve an American company taking full control of a foreign competitor and then relocating, new twists are also emerging.
Hospira's deal with Danone, if completed could be considered a "spinversion," in which a foreign company spins off a unit to an American buyer, allowing it to undertake an inversion.
If Hospira Inc. seals a deal for the unit, it would follow in the footsteps of Abbott Laboratories, which it was once a part of. Abbott Laboratories in 2004 spun off Hospira and it was until 2013 under the same corporate umbrella as AbbVie Inc.
For Hospira, this deal would be the biggest acquisition in its entire history. Hospira's largest target to date was Mayne Pharma Ltd, the Australian generic-drug maker, which it acquired in 2007, for around $2 billion.
For months, Danone has been trying to sell its medical nutrition business and it even spoke to Nestlé and German health-care group Fresenius SE.