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Akorn eyes $2 bln UCB unit in potential tax inversion-sources

NEW YORK (Reuters) – U.S. specialty drugmaker Akorn Inc is exploring a bid for Belgian drugmaker UCB SA’s U.S. subsidiary, a deal that would allow the company to move its tax domicile overseas in a practice known as inversion, according to people familiar with the matter.

UCB is looking to sell its U.S. specialty generics subsidiary, Kremers Urban Pharmaceuticals Inc, in a deal that could fetch as much as $2 billion, Reuters reported last month.

Akorn, an Illinois-based maker of specialty pharmaceuticals including opthalmic drugs, is among a small number of drugmakers that are looking at buying the business, people familiar with the matter said, asking not to be named because the matter is not public.

Akorn, which has a market capitalization of around $3.8 billion, has a relatively high tax rate for a pharmaceutical company with an estimated tax rate of around 37 percent for fiscal year 2014. That would compare to an average effective tax rate of around 23 percent for all pharmaceutical companies, according to PricewaterhouseCoopers.

There is no guarantee that Akorn will strike a deal for Kremers Urban and another drugmaker may emerge as the buyer, the people cautioned.

The UCB business could be an attractive target for other generic and specialty pharmaceutical companies such as Impax Laboratories Inc, Lupin Ltd and Lannett Company Inc, according to people familiar with the industry.

Representatives for Akorn and UCB could not be immediately reached for comment.

Based in Princeton, New Jersey, Kremers Urban is a maker of generic drugs with high barriers to market entry. Its product for the treatment of attention deficit disorder was approved by the U.S. Food and Drug Administration last year.

If it moves forward with a purchase of Kremers Urban, Akorn could join a growing list of U.S. companies that have sought to buy foreign companies or their divisions in order to cut tax bills and access cash held overseas.

So-called inversions have been increasingly popular in the healthcare industry and spread across to other industries this year, drawing criticism from the U.S. government and lawmakers.

On Monday, Treasury Secretary Jack Lew called for prompt action to stem the surge of U.S. businesses reincorporating abroad and said the Treasury Department was evaluating “what we can do to make these deals less economically appealing, and we plan to make a decision in the very near future.”

Senator Chuck Schumer, the No. 3 Senate Democrat, was circulating a draft bill to attack “earnings stripping” often associated with inversions. It was said to be applicable retroactively to deals as far back as 1994.

Inversions have been pursued by companies such as medical technology group Medtronic Inc which said it would buy Dublin-based Covidien PLC for $42.9 billion as well as fast-food chain Burger King Worldwide Inc, which has agreed to acquire Canadian coffee chain Tim Hortons Inc for $11.5 billion.

(Reporting by Olivia Oran and Soyoung Kim in New York; Editing by Tom Brown)