Medical device maker nears takeover proposal

NEW YORK — Medtronic is nearing a deal to buy a competitor, Covidien, for at least $45 billion in a deal that would help lower its corporate tax rate, people briefed on the matter said Saturday.

The two medical device companies are in advanced discussions, and a transaction could be announced as soon as Monday, these people said.

A takeover would be likely to value Covidien at between $45 billion and $50 billion. Talks are ongoing, however, and may still fall apart.


Medtronic and Covidien both have operations in Massachusetts. Representatives for the companies declined to comment.

Get Ground Game in your inbox:
Daily updates and analysis on national politics from James Pindell.
Thank you for signing up! Sign up for more newsletters here

If the deal is completed, Medtronic would be the latest big US company to reincorporate abroad through a so-called inversion.

As Covidien is based in Ireland, where the tax rate is substantially lower than it is in the United States, Medtronic would be likely to relocate there.

Inversions, in which a US company acquires an overseas competitor, allow acquirers to substantially reduce their tax rates and make it easier to access cash held overseas.

Several US corporations have inverted in recent years, with health care companies leading the way.


Earlier this year, Pfizer attempted to complete the biggest-ever inversion with its aborted attempt to buy AstraZeneca for $119 billion.

Other drug companies, including Endo Health Solutions of Malvern, Pa.; Perrigo, of Allegan, Mich.; and Actavis, based in Parsippany, N.J., have all relocated to Ireland through inversions.

Companies in other industries, including technology and industrials, have also inverted.

Even Chiquita, the banana grower and distributor, struck a deal in March to reincorporate abroad through an inversion.

But in recent months, political resistance to inversions has been growing. Lawmakers in the House and Senate have proposed bills aimed at curbing inversions, and the budget President Obama recently submitted to Congress included language that would effectively bar the process.


None of those efforts has gained traction, however. And the threat of a crackdown has inspired companies to look for overseas targets that might allow them to invert, while investment bankers have made inversions a core pitch to many potential clients.

A resurgent mergers and acquisitions market has also further emboldened US companies looking to buy foreign competitors.

Combined, these factors are likely to lead to a continued wave of inversions, as companies attempt to lower their tax rates through deals before it is too late.

News of talks between Medtronic and Covidien was reported earlier by The Wall Street Journal.