Medtronic Inc. chief executive Omar Ishrak heard an earful from stockholders who got their first chance Thursday to directly question the company's planned purchase of an Irish company.

Medtronic's $43 billion deal to buy Covidien Inc. has drawn enormous media and political scrutiny as one of a growing number of U.S. companies purchasing firms in countries with lower tax rates, then relocating their legal headquarters abroad to take advantage of those rates.

For Medtronic's shareholders, there's another issue to the deal: Its structure creates a surprise taxable event for them — one that could cost thousands of dollars depending on how many shares they own.

Their complaints enlivened the company's annual shareholder meeting, an event that is usually a formal discussion of numbers and new medical gadgetry.

"This is the least shareholder-friendly proposal that I have ever seen," said Lee Binger, 79, of Maple Grove, drawing hearty applause from the crowd of 500 during the meeting's Q&A period.

As Ishrak listened, Binger said he would have to sell much of his Medtronic stock to pay a tax on his capital gains — the difference between what he originally paid for the shares and their value at the time the Covidien deal closes. The tax is triggered because the deal effectively dissolves Fridley-based Medtronic Inc. and its stock. Shareholders would sell their stock and, in exchange, get shares in a new company called Medtronic PLC. Since Medtronic stock has performed well in recent years, people who bought at low prices decades ago face much greater sticker shock than institutional investors which buy and sell more frequently.

On Thursday, Medtronic shares closed at $64.10, not far from their all-time high of $65.50.

In response, Ishrak laid out the rationale for the deal in many of the same terms he has used since it was announced in June. He said Medtronic will reap long-term benefits through the acquisition, including the potential for greater profit that would raise the value of the investors' new shares.

"There is a pain here, which I understand, and I don't deny," he said.

The Covidien deal is expected to close by early next year, but it could happen before the end of this year. The Federal Trade Commission is investigating the sale, and the Treasury Department is expected to propose rules soon to discourage such deals, known as "corporate inversions."

Uncertainty about which tax year the deal would close also irritated attendees at the meeting. Others were upset that Medtronic is planning to cover an estimated $65 million in special excise taxes that apply to board members and officers of the company. Still other critics said they may not live long enough to see enough of a gain in the value of the new Ireland-domiciled company to make up for the immediate capital gains tax hit.

The meeting, held at a Medtronic office in Mounds View, kicked off with a presentation on how Medtronic products extend lives. But the question-and-answer session dealt mainly with the tax issues surrounding the Covidien deal.

At one point, Ishrak was heckled when he announced he would take only one more question, even though many hands in the crowd were still raised. He eventually relented and called on another half-dozen speakers.

Retired attorney Donald Zibell, 77, of Shoreview was skeptical that the deal would benefit him. He estimated that the stock price of the new Medtronic would have to rise by $17 a share in order to make up for the tax he will have to pay.

Medtronic executives suggested that stockholders could reduce their tax burdens by donating part of their holdings to charities or family trusts, rather than selling them. Former chief executive Bill George said that's what he intends to do to defray the estimated $1.5 million in taxes he will face.

George said the inversion would trigger taxes that he and all investors would have eventually faced anyway.

"The stock has doubled since Omar came on board three years ago," he said, referring to Ishrak. "I think this is the launchpad for the company to go to the next level."

At the meeting, Ishrak also confronted criticism that the deal would allow Medtronic to avoid U.S. taxes. After the transaction is concluded, he said, the company will still pay the same tax rates on dollars earned in the United States that it does today.

One of the key motives of the deal, he said, is to allow Medtronic to invest cash in United States operations without paying this country's 35 percent corporate tax rate. Avoiding those taxes would allow the company to invest $10 billion in U.S. facilities that it could otherwise not afford under a traditional acquisition, Ishrak said, repeating an oft-heard pledge about the deal.

Joe Carlson • 612-673-4779