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Top U.S. lawmaker urges Hospira not to flee tax system

By Kevin Drawbaugh

WASHINGTON (Reuters) - A senior U.S. senator said on Thursday he has written to Hospira Inc and urged the drug and medical device maker not to move its tax domicile abroad to save on U.S. taxes.

Citing recent reports that Hospira plans to buy the medical nutrition unit of France's Danone SA, Dick Durbin said in a statement he told Chief Executive Officer Michael Ball that Hospira should not "turn its back on American taxpayers and consumers by taking advantage of a tax loophole called 'inversion.'"

The statement from the No. 2 Democrat in the Senate came amid growing concern in Washington with inversion transactions, which allow U.S. corporations to shift their tax home-base to a different country and cut their U.S. tax bills.

Of 52 inversions and similar deals done since 1983, 22 have occurred just since 2008, with 10 more being finalized and many more said to be in the works.

Hospira is based in Lake Forest, Illinois, Durbin's home state. The company could not immediately be reached for comment.

In a letter to Ball, Durbin said: "Recent reports indicate that Hospira plans to buy the medical-nutrition unit of the French company Danone so that it can claim domicile abroad and dodge U.S. taxes.

"I strongly urge you and the board of directors not to move your company’s headquarters overseas, since a significant portion of Hospira’s revenue comes from U.S. taxpayers and depends on U.S. taxpayer-funded support."

Hospira's shares closed on Thursday up less than 1 percent at $55.71 on the New York Stock Exchange.

The Financial Times, citing people familiar with the situation, reported last month that Danone was in talks to sell its medical nutrition business to Hospira in a deal valuing the unit at about $5 billion.

The business paper said on its website that no deal was certain and the talks were ongoing.

Contacted by Reuters on July 27, a spokesman for Danone in Paris declined to comment.

Separately, senators Ron Wyden, Carl Levin and Charles Schumer, all Democrats, released statements of concern on Thursday about the inversion wave.

"The inversion virus continues to plague our country and I’m encouraged that colleagues from both sides of the aisle are offering ideas on a solution," said Wyden in a statement.

He chairs the tax law-writing Senate Finance Committee.

(Reporting by Kevin Drawbaugh; Editing by Richard Chang and Andre Grenon)

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