Medtronic execs, shareholders lock horns over tax-inversion deal
- Things got testy at Medtronic's annual shareholder meeting as stock owners raised concerns that they may face a capital gains tax hit -- even as Medtronic enjoys lower rates -- following the company's tax-inversion merger with Covidien, TwinCities.com reports.
- Medtronic's $43 billion buyout of Covidien would also shift the Fridley, MN-based company's corporate citizenship overseas to Ireland, where firms pay a lower tax rate.
- Medtronic CEO Omar Ishrak said shareholders should focus on the long-term growth potential fostered by the deal. Tax-inversion mergers have become increasingly popular with biotech and pharmaceutical companies -- and a regular target of lawmakers' scorn.
Shareholder meeting attendees reportedly told Ishrak that the Medtronic-Covidien deal could force some investors to pay a hefty capital gains tax that may ultimately slash 20% to 35% off of their stocks' net value. "This is the least shareholder-friendly proposal I have ever seen," said one 79-year old attendee. Many elderly stock owners pointed out that they wouldn't be around long enough to enjoy the long-term benefits reaped from the Covidien merger.
Ishrak was not unsympathetic to the concerns. "There is pain here, which I understand and I don't deny," he said. "All I can say is that, on balance, for the long-term value of the company, this is the right thing."
The Medtronic-Covidien deal is slated to close later this year, or early 2015. The Wall Street Journal reported on Monday that Treasury officials are preparing a slate of regulatory options to discourage the burgeoning trend of tax-inversions.