Shareholders Approve Medtronic-Covidien Deal
Medtronic Inc. took one step closer to becoming an Irish company when shareholders voted in favor of acquiring Dublin-based medical supply maker Covidien Ltd.
Covidien shareholders similarly voted on the deal early today and also approved it. The acquisition now goes before the Irish High Court, which may take several weeks to review and okay it.
The Star Tribune reported that shortly after the vote, Medtronic CEO Omar Ishrak said that “the completion of the acquisition of Covidien by Medtronic will usher in a historic new chapter in the history of Medtronic and it will help us advance our long-standing mission of alleviating pain, restoring health and extending life for more patients around the world.”
The $43 billion purchase has been labeled as controversial by some because it’s structured as an inversion, where Medtronic purchases Covidien and then reincorporates in Ireland, which has a lower tax rate. Medtronic’s “operational headquarters” will remain in Minnesota.
The company has tried to assuage shareholders, state officials and the public of the move, saying in a statement that it will remain “strongly committed to the U.S. as a healthcare innovator, strategic business partner and employer of choice.” More than $10 billion was promised in domestic technology investments over a decade, and Gov. Mark Dayton received assurances from the company that 1,000 jobs will be created in the state over the next five years.
The rancor has been particularly focused within the state as some long-time shareholders will get hit with steep capital gains taxes when shares are exchanged for ones with the new Medtronic.
Meanwhile, the Wall Street Journal reported that the Minnesota State Board of Investment, a small—but symbolic—shareholder in Medtronic will abstain from voting after the committee came to a 2-2 deadlock on the issue. In a statement sent to the paper, the board said they viewed the acquisition as a tax avoidance scheme and that they “vote against both off shore tax avoidance transactions and golden parachutes with tax gross ups,” citing the $73 million being sought from shareholders to cover excise taxes placed on senior executives and board members.
Shares of Medtronic were down slightly in trading by midday Tuesday to $71.25.