Medtronic Inc, the world’s No. 2 medical device maker, is negotiating to buy Dublin-based Covidien PLC for more than US$40 billion, a person familiar with the talks said, in what may become the latest deal driven by potential tax savings from relocating overseas.
The transaction may be structured as a tax inversion, allowing Medtronic to move its legal residence to Ireland, the person said.
There have been about 44 inversions done so far, according to data compiled by Bloomberg.
The pace has picked up since January 2012, with more than a dozen such deals, even as the US Congress considers measures to stop the exodus.
Medtronic is holding more than US$14 billion in cash, most of it outside the US, since it does not pay taxes until it brings profits back into the country. The company, second only to Johnson & Johnson in medical-device sales, is often cited as a potential acquirer of healthcare competitors based in low-tax countries like Ireland and the UK.
“At its investor day, Medtronic officials specifically said they wouldn’t do a deal just to be structured as an inversion,” Skillman, New Jersey-based Bloomberg Industries analyst Jason McGorman said. “It would be interesting to see what they say if they do this deal.”
Covidien spokeswoman Lisa Clemence, and Medtronic spokeswoman Cindy Resman declined to comment on the deal, which was first reported on Saturday by the Wall Street Journal.
Covidien fell less than 1 percent to US$72.02 on Friday in New York. Medtronic fell less than 1 percent to US$60.70. The shares of both firms have risen 5.8 percent this year.
Covidien has a market value of US$32.5 billion, based on its closing stock price. The acquisition, could help Medtronic reduce its corporate tax rate and give it lower-cost access to money held outside of the country.
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