Medtronic: Sweet Home Ireland

Medtronic, Covidien in Advanced Talks to Combine - Deal, Valued at More Than $40 Billion, Would Be Structured as So-Called Tax Inversion

Medical-device maker Medtronic Inc. is in advanced talks to combine with rival Covidien PLC in a deal valued at more than $40 billion, according to people familiar with the matter. The deal, which could be announced Monday, would be structured as a so-called tax inversion, according to one of the people. In such deals, acquirers buy companies domiciled in countries with lower corporate tax rates than their own as a means of lowering their overall rate. Covidien is based in Ireland, which is known for having a relatively low tax rate.
Comment: Corporate Inversion defined:
Re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements.

Comments: Others domiciled in Ireland: Accenture, Seagate. The problem: High US Corporate tax rates.


  1. More: Medtronic-Covidien: The End of the American Dream?:

    The Medtronic bid for Covidien may not come to pass, but a deal would lower its tax rate substantially. In Ireland, where Covidien is based, the main corporate tax rate is 12.5%, compared with a much higher 35% in the U.S., ... There is irony here. Despite switching domiciles, drug and device maker stocks can remain on the S&P 500. The companies can avail themselves of U.S. laws protecting intellectual property. And executives can stay put. Last year, Actavis executives chuckled at the thought of moving to Ireland after buying Warner-Chilcott. “Everybody loves New Jersey too much,” said Paul Bisaro, the Actavis chief executive.

    This also helps to explain why more tax inversions appear likely. Granted, it is a stretch – and then some – to suggest the entire U.S. medical products industry will shift headquarters to foreign countries. But you can be certain that other drug and device makers find the concept intriguing, if not seductive. Given the right opportunity, they have a responsibility to shareholders to consider such a move.

    And who can blame them? After all, who doesn’t want a lower tax bill?

  2. Medtronic, Minnesota Strong Since 1949, Now Says 'Kiss Me, I'm Irish'

    When courting votes in the heartland, Chicago sexagenarian Hillary Clinton always made sure to mention how she was born "in the middle of America, in the middle of the century." The same could be said for 65-year-old Minneapolis medical-device maker Medtronic (NYSE:MDT), at least until today. Now, however, it is making googly Irish eyes at the Emerald Isle purely for tax purposes. (As Bono can attest, U2 can be Irish for big bucks.) Maybe Medtronic will enjoy the last laugh. For its stock -- in extremely unusual market activity for an acquiring company -- is surging some 12.03% this morning after buying Dublin's own Covidien (NYSE:COV) for $42.9 billion.

  3. More on Medtronic likely to be booted from Fortune 500 over deal to move HQ overseas

    Fortune 500 overseers have tossed out eight companies that moved their headquarters out of the U.S. Some critics have dubbed such enterprises "runaway companies." The companies are:

    Eaton, from Cleveland to Ireland.
    Ingersoll-Rand, from Piscataway, N.J. to Ireland by way of Bermuda.
    Aon, from Chicago to the U.K.
    Tyco International, from Princeton, N.J. to Switzerland by way of Bermuda.
    Liberty Global, from Englewood, N.J. to the U.K.
    Seagate Technology, from Scotts Valley, Ca. to Ireland by way of the Cayman Islands.
    Cooper Industries Ltd., from Houston to Ireland by way of Bermuda.
    Foster Wheeler AG, from Clinton, N.J. to Switzerland by way of Bermuda.

  4. Walgreen becomes government whipping boyIt's demagogic blather to say it's unpatriotic to seek lower tax rates. This country was literally founded on a tax beef. "Taxation without representation." Ring a bell? The corporations are doing their job. The government is there to hold their greed in check. All of this has been debated and settled for hundreds of years. The U.S. has a Kant / Locke hybrid model that generally works pretty well.


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