$uch $weet mu$ic....
"Medical device maker nears takeover proposal" by Michael J. de la Merced | New York Times June 15, 2014
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.
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.
I had a bunch of clippings and notes regarding that. Looks like I will be throwing them out now.
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.
Election year maneuvering and a cash grab at the same time.
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 those are the guys running the $how, so....
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.
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Of course, it's all good in the Globe:
"Medtronic agrees to buy Covidien for $42.9b in cash, stock; Takeover among biggest ever for a Mass. company" by Robert Weisman | Globe Staff June 16, 2014
The medical device giant Medtronic Inc. has agreed to acquire the Mansfield-based health care supplier Covidien PLC for $42.9 billion in cash and stock, making it one of the largest takeovers of a Massachusetts company in history.
The price tag on the deal, disclosed Sunday night, is more than twice the $20.1 billion that the French drug maker Sanofi SA paid for Genzyme Corp., a Cambridge biotech, in 2011. That was previously the richest buyout of a Bay State business in recent years.
Covidien, formerly known as Tyco HealthCare, has about 38,000 workers globally, including about 1,800 in Massachusetts. While its corporate staff and US headquarters are in Mansfield, the company is incorporated in Dublin. That enables it to pay less in taxes, because Ireland taxes companies at lower rates than does the United States, where the corporate tax rate of 35 percent is among the world’s highest.
The deal is likely to result in an unspecified number of job cuts in Massachusetts. “It’s expected that there will be some synergies in headquarters jobs, and the companies will address that as part of the integration planning,” said Covidien vice president Peter Lucht.
That means layoffs.
Medtronic, based in Minneapolis, competes with Natick’s Boston Scientific Corp. in the global market for cardiac equipment and other medical devices. By purchasing Covidien, which sells a broad range of products, from sutures to ventilators, and has itself bought more than a dozen smaller medical gear companies over the past seven years, Medtronic will create an industry goliath. It will have 87,000 employees, a presence in more than 150 countries, and combined annual revenue of $27 billion.
“This acquisition will allow Medtronic to reach more patients, in more ways and in more places,” its chief executive, Omar Ishrak, said in a statement released Sunday night.
A Cambridge health care industry consultant, Harry Glorikian, said the pace of consolidation is picking up in the medical supply sector as hospitals and doctor practices race to join forces and deliver more integrated care.
“Everyone needs more muscle now,” Glorikian said. “Suppliers have to sell into larger health care systems under the Affordable Care Act. These two companies coming together gives them a broader footprint in the US and globally. Companies are finding it harder to make as much as they did in the past, so they have to be able to offer more products and services.”
The combination will establish a “commercial powerhouse,” said Jonathan Gertler, managing partner and chief executive at Back Bay Life Science Advisors in Boston. That will be particularly helpful in the medical device market, where the products are highly segmented, he suggested.
“Although there are blockbuster devices, a lot of the sales in that business are devices used in very specific therapeutic applications,” Gertler said. “You unite two companies like this and you have remarkable therapeutic coverage in the hospital setting.”
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One factor driving Medtronic’s interest in Covidien apparently was its desire to undertake a so-called tax inversion, effectively switching its incorporation from Minneapolis to Dublin to take advantage of Ireland’s lower rates.
More than a dozen US companies have adopted that strategy in recent years, using the acquisition of foreign companies or US companies incorporated abroad to reduce their tax liability. The pharmaceutical giant Pfizer Inc.’s pursuit of London-based AstraZeneca PLC, a $120 billion bid that collapsed last month, was an attempt to lower its corporate tax rate through an inversion.
They said no but Pfizer is committed. Pfizer raised its offer they still said no, and that led to job cuts. Damn ba$tards finally took no for an answer -- for now!
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Covidien last fall began a five-year restructuring aimed at cutting costs and improving efficiency. As part of that plan, it has eliminated about 150 jobs worldwide, including about 70 in Mansfield.
The company spun off its drug-making business last summer and has been working to consolidate its manufacturing and distribution sites worldwide. The company said its plan aims to save $250 million to $300 million a year.
Tyco International Ltd., which had its headquarters in Bermuda, divested its health care division in 2007.
Related: Covidien was once just a piece of giant Tyco
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"Medtronic sees big savings in deal for Covidien; Says an $850m benefit over two or three years will boost R&D effort" by Robert Weisman | Globe Staff June 16, 2014
Medtronic’s buyout of Covidien, unveiled late Sunday, is the largest in the history of the medical technology industry.
***********
Under the deal, Medtronic will be able to shift its legal domicile to Ireland, where Covidien is now officially incorporated. Ireland taxes companies at much lower rates than does the United States.
Medtronic agreed to pay $93.22 for each share of Covidien in a stock-and-cash deal that would create the world’s second-largest medical device company, after Johnson & Johnson. The price represents a 29 percent premium over Covidien’s closing stock price on Friday....
Securities analysts said the mega-deal may foreshadow an acceleration of mergers and acquisitions in the medical technology sector as companies try to improve their bargaining clout with the hospitals and doctor practices to which they sell products and services....
I think the Globe prescribed the wrong thing because this is making me sick.
Medtronic’s chief financial officer, Gary Ellis, told analysts that the cost savings from the Covidien acquisition will come initially from combining administrative and back-office operations and later from consolidating manufacturing plants and information technology systems around the globe.
“A lot of it is public company costs that have to be eliminated,” Ellis said....
While promising to invest more aggressively in new products and innovation, especially in the United States, Medtronic executives downplayed the move of their headquarters to Ireland in an effort to reduce corporate tax liability. The company already has registered in Ireland as Medtronic PLC through a so-called tax inversion that allows it to take advantage of Covidien’s tax status there.
Covidien’s chief executive, Jose E. Almeida, told analysts the buyout will be “good for employees, good for our customers, and most important good for patients.”
He did not discuss the fate of Covidien’s corporate staff, though Ishrak said Medtronic hopes to retain many executives and managers from Covidien.
“This is one plus one equals five,” Almeida said. “This is a force multiplier that we could not have achieved by ourselves.”
Even the field of medicine and healing is a war!
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"Covidien purchase could have tax benefits for Medtronic" by Jack Newsham | Globe Correspondent June 16, 2014
Among the more valuable assets Medtronic acquired with its $42.9 billion purchase of Covidien PLC:
Covidien’s Irish address.
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Normally, when a US-based company buys a smaller foreign one, the foreign company becomes a part of the American entity that acquired it. Profits generated by the foreign business of the American company would be sent back to the United States and taxed at the US corporate tax rate of 35 percent.
But Medtronic’s purchase is what’s known as an inversion, a particular type of corporate buyout deal that is attracting much scrutiny in Washington.
In an inversion, the process is flipped: Although the American company is doing the acquiring, it is reincorporated in whatever low-tax or no-tax country its target is located in, subject to a few requirements....
Medtronic executives have denied that their primary goal with the acquisition was to gain the tax benefit that comes with inversion, characterizing it as a “slight benefit” in a conference call on Monday morning.
“The first thing we looked at was, from a strategic perspective, what kind of opportunities are there,” Medtronic chief executive Omar Ishrak said during the call.
Ireland’s baseline corporate tax rate is 12.5 percent, compared to 35 percent in the United States. Although the taxes levied on Medtronic and Covidien weren’t very far apart after various other taxes and write-offs were factored in — Medtronic’s effective tax rate was 18.4 percent in its most recent fiscal year, and Covidien, which faced an inflated tax bill in 2013 owing to ongoing disputes with the IRS, paid an effective tax rate of 14.7 percent in 2012 — shaving just a few percentage points off its tax bill could save billions of dollars in the long run for Medtronic.
So that 35% figure is really bogus, isn't it? Just another con and distortion, right? Meant to manipulate the mind?
The company recorded a profit of $12.5 billion in its last fiscal year.
Inversions were “initially something that people weren’t too worried about, from a tax policy perspective,” said Daniel Berman, a principal at the Boston offices of McGladney LLP and a former Treasury official. But regulators in the United States and Europe are looking into changing the laws to curtail their tax losses, he said, as “people start to wonder what the tax law is allowing that it shouldn’t allow in order to make this so popular.”
I wouldn't hold my breath waiting if I were you.
No estimates have been made of how much Medtronic stands to save on its taxes after reincorporating itself in Ireland, but the larger issue of tax losses from corporate inversions has gotten the attention of the federal government.
After 30 years of enabling?
Under changes passed in 2004 that sought to crack down on the kind of inversion that prevailed in the 1990s, the foreign company in an inversion must control at least 20 percent of the combined company for the American company to change its address.
But a bill submitted by Senator Carl Levin, a Democrat from Michigan, would make shareholders in the foreign company own at least half the shares in the combined company.
The bill would be retroactive to May 2014, which would prevent Medtronic and many other companies from getting a tax benefit....
The Levin bill, called the Stop Corporate Inversions Act of 2014, has 20 cosponsors. A report by the Senate Banking Committee has estimated the bill would generate an additional $19.5 billion in tax revenue over the next 10 years.
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Related:
Covidien agrees to acquisition by rival
Top Covidien executives in line for nearly $80m after buyout
I, too, would be smiling.
"EU investigates tax breaks for Apple, others" by James Kanter | New York Times June 12, 2014
BRUSSELS — The European Union’s top antitrust official opened an investigation Wednesday into the way that countries, including Ireland, provide tax arrangements that enable multinational corporations such as Apple Inc. to reduce their tax bills worldwide.
If it leads to changes, the inquiry, begun by Joaquín Almunia, the EU’s competition commissioner, could undermine the tax strategies pursued by many US technology companies that have their international headquarters in Ireland and in other countries in the bloc.
The inquiry also covers Starbucks Corp. in the Netherlands and Fiat Finance and Trade in Luxembourg.
Ireland has become a preferred place for giant technology companies to place their international headquarters, largely because of concessions from the government allowing businesses to obtain further breaks on corporate tax rates that, at 12.5 percent, are already low.
“In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” Almunia said in a statement. “Under the EU’s state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the member state were applied in a fair and non-discriminatory way.”
The investigation represents a particular threat to a business model finessed by Ireland, which has used its tax strategies and light-touch regulation to attract major multinational corporations, providing prestige and jobs that might otherwise end up elsewhere in the European Union.
To at least headquarter there.
“The company in question did not receive selective treatment and there was no ‘special tax rate deal,’ ” the Irish government said in a statement on Wednesday, apparently referring to Apple. “We are very confident that we will successfully defend our position.’’
Similar tax inducements offered by the Netherlands and Luxembourg are also expected to be examined by EU officials, who have previously said that tax avoidance and evasion in the European Union cost governments huge sums each year.
In March, Almunia’s officials threatened to take Luxembourg to court in a bid to force it to provide information that would allow the officials to assess whether certain tax practices violated the bloc’s rules.
There are no fines in such state aid cases, which are mainly aimed at stopping unfair competition between nations within the European Union. But if the commission finds that illegal aid was given, governments found to have doled out the unfair subsidies can be ordered to recover the money from the recipient companies.
The effort by the EU authorities is part of a global crackdown on loopholes that have allowed giant companies such as Apple and Starbucks to use complex tax structures to pay small amounts of tax on their operations outside the United States. The maneuvers, critics say, allow corporations to operate as virtually stateless entities.
I couldn't have said it any better.
Apple, despite being among the most profitable US companies, has avoided billions in taxes in the United States and around the world through a web of complex subsidiaries, according to US lawmakers.
See:
An Apple For Lunch
An Apple a Day the Globe Way
Bad Apple Avoids Taxes
Google Gets Around British Taxes
In another widely cited example, Starbucks has paid low corporate taxes in Britain despite operating several hundred stores in that country.
The Irish government’s handling of corporate taxation has become a delicate matter between Dublin and Washington.
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Related: "Cross-border deals are accelerating as US companies seek lower taxes and ways to spend almost $2 trillion protected from US taxes in overseas cash."
Look what they found under the mattress:
"Ireland investigating maternity homes" by Douglas Dalby | New York Times June 11, 2014
DUBLIN — The Irish government said Tuesday that it would begin an investigation into allegations of neglect and criminality at so-called mother-and-baby homes over several decades.
Related: Ghastly Discovery in Ireland
It is about to get worse.
The inquiry is expected to examine a range of issues, including high mortality rates, burial practices, child trafficking, and secret vaccine trials, the government said.
They were using the kids as guinea pigs.
The decision to mount an inquiry followed the revelation that the remains of 796 children, mainly babies, were secretly buried in a home that was run by the Sisters of Bon Secours in Tuam, in County Galway in the west, between 1925 and 1961.
It wasn't only there, nor was it only in Ireland.
Charlie Flanagan, Ireland’s minister for children, said in a radio interview on Tuesday that it was important “that a light be shone on these dark periods.”
Just for a day or two, though. It's not like this is an agenda-pushing overthrow or anything.
He added, “I believe that Tuam should not be looked at in isolation because over the last century we have had mother-and-baby homes right up and down the country.”
The pressure for an investigation grew after news reports that the nuns had disposed of the bodies in a disused septic tank. The whereabouts of the remains are still unknown; on Tuesday, it emerged that the records from the home contain no information on the location of the children who died there, leading to renewed calls to excavate the site.
In total, an estimated 35,000 unmarried mothers passed through the 10 homes operated by religious orders from the 1920s. All but one of the homes was Roman Catholic.
The Tuam home closed in 1961 but some of the institutions were still operating well into the 1980s.
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Also see: Gerry Conlon, 60; wrongly convicted of IRA bombing
Gerry Conlon an innocent, good man
Set up by Britain's FRU, was he?
Fishing buoy returned from Ireland
Time to get back to the $hire.
