Medtronic is nearing a deal to buy a competitor, Covidien, for more than $45 billion, in a deal that would help lower its corporate tax rate, people briefed on the matter said on Saturday.
The two sides 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.
Representatives for Medtronic and Covidien declined to comment.
If completed, Medtronic would be the latest big American company to reincorporate abroad through a so-called inversion. As Coviden 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 an American company acquirers an overseas competitor, allow acquirers to substantially reduce their tax rate and make it easier to access cash held overseas.
A wave of U.S. corporations have inverted in recent years, with health care companies leading the charge.
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, from Malvern, Pa.; Perrigo, from in 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 maker, 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.
And a resurgent mergers and acquisitions market has further emboldened American 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.
The two sides 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.
Representatives for Medtronic and Covidien declined to comment.
If completed, Medtronic would be the latest big American company to reincorporate abroad through a so-called inversion. As Coviden 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 an American company acquirers an overseas competitor, allow acquirers to substantially reduce their tax rate and make it easier to access cash held overseas.
A wave of U.S. corporations have inverted in recent years, with health care companies leading the charge.
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, from Malvern, Pa.; Perrigo, from in 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 maker, 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.
And a resurgent mergers and acquisitions market has further emboldened American 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.
©The New York Times News Service