Reports: Danone In Talks To Sell Medical Nutrition Unit To Hospira For $5 Bln

(RTTNews) - French consumer products and dairy giant Danone SA (DANOY.PK) is in talks to sell its medical nutrition unit to U.S. pharmaceutical and medication delivery company Hospira, Inc. (HSP) in a cash and stock deal that could value the unit at nearly $5 billion, according to media reports on Sunday.

A deal, if successful, would reportedly enable Lake Forest, Illinois-based Hospira to shift its tax base to France and also be the latest among a series of so-called tax inversion deals meant to avoid significantly higher U.S. taxes.

Danone was also said to be separately in talks with Swiss food giant Nestle SA (NSRGY) and German healthcare group Fresenius SE for the sale of the medical nutrition unit, which makes baby food and some formula brands.

Bloomberg had reported in May that the unit was for sale and was valued at more than 3 billion euros, or $4 billion. A sale of the unit would enable Danone, the world's largest yogurt-maker, to focus on its food and consumer brands.

Danone reported on Friday that its medical nutrition unit recorded a 7.3 percent increase in like-for-like sales in the second quarter of 2014, driven by 6.2 percent growth in sales volume. The main contributors to the unit's sales growth were Brazil, Turkey, China and the UK.

The unit's products include fortified products like Fortimel and Nutrison to counter malnutrition and eating difficulties, in addition to targeted medical nutrition products like Nutilis and Neocate for people suffering from allergies or undergoing medical treatment. The unit generated sales of 1.3 billion euros in 2013 and represented more than 6 percent of total group sales for the year.

Danone, which makes Activia yogurt and Evian water, made its foray into the medical-nutrition market in 2007 when it bought Royal Numico N.V., the Dutch maker of baby and medical foods.

A sale of the medical nutrition unit would be Danone's biggest divestiture after it sold its biscuits and cereal products division to Kraft Foods Inc. (KRFT) in 2007 for $7.2 billion.

Hospira, which has a market capitalization of $8.64 billion, was spun off from Abbott Laboratories (ABT) in 2004. Abbott also spun off research-based biopharmaceutical company AbbVie Inc. (ABBV) in 2013.

AbbVie recently agreed to acquire Ireland-based maker of drugs for rare diseases, Shire plc (SHP.L, SHPG), in a tax-inversion deal valued at $54.7 billion. The deal will help AbbVie to redomicile in Ireland, which has a much lower tax rate than the U.S.

Several U.S. healthcare companies are increasingly looking at inversions as an option to escape the high rate of U.S. corporate taxes, while the U.S. overhauls its healthcare system under the Affordable Care Act.

In another recent tax inversion deal, medical device maker Medtronic, Inc. (MDT) agreed to acquire Dublin, Ireland-based smaller rival Covidien plc (COV) in a cash and stock deal valued at about $42.9 billion.

U.S. drugmaker Pfizer Inc. (PFE) recently made an abortive $116.6 billion takeover bid for British drug maker AstraZeneca plc (AZN, AZN.L) through an inversion. Parsippany, New Jersey-based Actavis plc (ACT) relocated to Ireland through an inversion.

However, U.S. lawmakers are now targeting legislation aimed at curbing U.S. companies from doing inversions.

HSP closed Friday's trading at $51.72, down $0.10 or 0.19 percent on a volume of 815,517 shares. DANOY closed trading at $14.88, down $0.26 or 1.72 percent on a volume of 1.12 million shares.