Medtronic Inc. executives reaffirmed their commitment to move the company's legal headquarters to Ireland through a corporate acquisition, despite public criticism and the threat of changes in the tax code.
The new comments on the planned purchase of Covidien, a surgical supply company, came Tuesday as Medtronic announced its latest quarterly results. Sales jumped solidly in the May-to-July period, but its bottom line was hit by one-time costs, including $41 million it has already spent on the deal.
"We're certainly standing by the strategic benefits the deal has to offer," Medtronic chief executive Omar Ishrak said in an interview.
In June, Fridley-based Medtronic said it would pay $42.9 billion for the Dublin-based surgical supply company, the biggest acquisition in its history. The move came after several other U.S. health care companies announced similar plans to buy a company in another country where corporate taxes are lower than the U.S. rate of 35 percent.
Some Medtronic shareholders have voiced concern about the Covidien deal, which is expected to trigger tax liabilities for them because it forces an exchange of shares.
"I was very surprised — stunned, you might say," said longtime Medtronic investor Lois Powers, 95, of Okoboji, Iowa. Stockholders like Powers may have the chance to voice their concerns when the company holds its annual meeting of shareholders at its Mounds View campus Thursday.
Other critics say the deal could allow Medtronic to avoid U.S. taxes on $14 billion in cash it holds overseas. Minnesotan members of Congress have signed on to several bills to limit "corporate inversion" acquisitions like the proposed Medtronic-Covidien deal, and the federal Treasury Department is examining whether to issue new rules to potentially discourage such deals.
Ishrak said those reactions to the acquisition are not altogether surprising because of what he called "the noise" surrounding it. But company executives aren't drafting a Plan B if federal rules end up prohibiting the deal.
