Medtronic founder Bakken praises Covidien purchase

WASHINGTON - Medtronic Inc. founder Earl Bakken has reached out to employees of the company to promote its purchase of Covidien, a deal that has stirred controversy over the tax benefits it would bring.

The Fridley-based device maker on Thursday sent a message signed by Bakken that praises the $43 billion deal, which would move Medtronic's corporate headquarters to Ireland while maintaining its operational headquarters in Minnesota.

Bakken, inventor of the battery-operated pacemaker, has enjoyed iconic status within Medtronic and in Minnesota for founding the company in a Minneapolis garage in 1949.

"I've been imagining some of the exciting opportunities that are possible with a combination of Medtronic and Covidien," Bakken said in the message distributed by the Fridley-based company. "I wanted to pass along some of my thoughts and observations on the proposed acquisition of Covidien and convey to you my support and excitement for this next chapter in Medtronic's history."

Bakken, who is retired in Hawaii, hit on the theme of expanded service to more patients. He made no mention of the national controversy over Medtronic's potential to reduce U.S. taxes by moving the corporate headquarters to Ireland.

President Obama has called such moves unpatriotic because they remove billions of dollars in revenue from the federal budget. Obama has asked Congress to pass laws to restrict or stop the practice.

Bakken instead focused on the deal's potential to enable Medtronic to "serve more patients, in more ways, and in more places around the world than ever before.

Bakken's missive is the latest move in a campaign to rally support for the purchase. Medtronic CEO Omar Ishrak and Covidien CEO Jose Almeida are currently crisscrossing the country explaining to employees the strategic advantages of marrying the companies.

Despite their efforts, the merger continues to draw political and legal fire.

Critics say the new Medtronic could be just as innovative if it kept its headquarters in the United States. Moving to Ireland is about nothing more than tax avoidance, not better research, critics such as the consumer group Citizens for Tax Justice insist.

Proposals in the U.S. Senate and House would, if passed, force major changes in the deal or possibly kill it. Medtronic has hired ex-Senators Trent Lott and John Breaux to lobby against those measures.

The Federal Trade Commission has twice requested detailed information on the deal. The Treasury Department is considering regulatory adjustments meant to take away some of the financial incentives for companies to move their headquarters abroad to lower their taxes.

Lipovich's filing is the third class-action suit to challenge the sale since it was announced June 15. Another Covidien shareholder, Richard Taxman, has sued, as has Medtronic shareholder Lewis Merenstein. In a case filed in Hennepin County, Merenstein claims Medtronic's board and senior executives have enriched themselves at the expense of Medtronic shareholders who will face big capital gains tax bills if the company consummates the purchase.

Jim Spencer • 202-383-6123