Danone in talks to sell medical arm to Hospira

 
Kasmira Jefford
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French dairy group Danone is reported to be in talks to sell its medical nutrition arm to US group Hospira in a deal valuing the business at about $5bn (£2.95bn).

Danone has been exploring a sale of the business, which makes food and drinks for people with special nutritional needs, since earlier this year as it looks to expand its faster-growing baby food and dairy businesses.

The two companies have been in talks for several weeks and are discussing the terms of a potential cash and stock deal, the Financial Times said last night, adding that there was no certainty of a deal being made.

Buying Danone’s medical nutrition business could also pave the way for the American pharmaceutical company to move its tax base to Europe, allowing it to take advantage of France’s lower rate of corporation tax.

The practice, known as tax inversion, has been heavily criticised by the US government, with President Barack Obama on Thursday describing companies shifting their domicile overseas as “corporate deserters”.

There have been over eight examples of inversion deals this year, with the latest including US drug-maker Abbvie’s takeover of UK pharmaceuticals group Shire.

Danone and Hospira were unavailable for comment yesterday.

News of talks with Hospira come after Danone posted a worse-than-expected fall in first-half operating profit last Friday, blaming sluggish sales of baby food in Asia and dairy products in Europe.

However the company, which competes with much larger rivals Nestle and Unilever, said it was still confident of hitting full-year targets.

Danone is trying to rebuild its position in China after an infant formula product recall last year. It has also had a tough year in Europe, where its business has been hit by weak consumer spending and rising milk prices.

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