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Hospira talks with Danone stall, preventing yet another tax inversion deal

Consumer Goods Inside A Tesco Metro Supermarket StoreConsumer Goods Inside A Tesco Metro Supermarket Store
Cartons of Cow & Gate infant milk powder, produced by Danone, sit for sale inside a Tesco Metro store in London. Photograph by Simon Dawson — Bloomberg via Getty Images

Hospira’s plans to move its tax-base abroad may be stymied as talks to buy the medical nutrition unit of Danone SA have stalled.

Hospira (HSP), a U.S.-based medical device maker, was in talks to buy the the France-based unit for about $5 billion in cash and stock. The talks shuttered to a stop this week, and it’s unclear if the deal and its structure can be resuscitated, Reuters reported.

The acquisition would the be the latest tax inversion deal–the source of much ire for the U.S. government which has decried such deals as un-American.

In inversions, companies target foreign firms in order to move their headquarters abroad, taking advantage of a lower corporate tax rate and freeing up foreign cash reserves that would otherwise be subject to the U.S. 35% corporate tax rate.

This year has been the busiest year ever for tax inversion deals. Since January, ten corporate inversions deals have been inked.

When Hospira’s interest in the Danone (GPDNF) medical nutrition unit was revealed, U.S. senator Dick Durbin appealed to the medical device maker to not “turn its back on American taxpayers and consumers by taking advantage of a tax loophole.”

A Hospira deal does not need to rely on a tax inversion structure, a source told Reuters. While talks have stalled for now, there is a potential that the structure of the deal could avoid moving the tax base abroad.

That wouldn’t be the first U.S. and foreign company pair-up that opted to keep its headquarters local. Walgreen (WAG) gave into public pressure and opted to keep its home base in the Chicago area after buying European peer Alliance Boots.

It’s unclear why Hospira’s talks with Danone stalled. The French company is still shopping its unit around and other interested bidders include Germany-based Fresenius SE (FRE) and Switzerland-based Nestle SA (NSRGY).