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Senior Fellow William W. George and Case Researcher Monica Baraldi (Case Research & Writing Group) prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2017 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
W I L L I A M W . G E O R G E
M O N I C A B A R A L D I
Medtronic: Making the Big Leap Forward (A)
In late September 2014, Medtronic CEO Omar Ishrak was reflecting on the importance of the $50 billion acquisition of Ireland-based Covidien announced that past June. Acquiring Covidien seemed like the perfect transformative move for Medtronic: making it the largest medical technology company in the world while broadening its ability to fulfill its mission of “alleviating pain, restoring health, and extending life” for millions more patients every year. (See Exhibit 1 for Medtronic mission.)
However, Ishrak was concerned about the impact of the recent announcements from the U.S. Treasury Department on the planned transaction. On July 27, U.S. Treasury Secretary Jacob Lew pledged in an op-ed in the Washington Post to halt tax inversions.1 On September 22, Lew had issued new rules for American companies seeking to change their legal domicile to lower tax jurisdictions through mergers with foreign companies—so-called tax inversions.2 Most significant among these for Medtronic was the restriction on its ability to use $13.5 billion in overseas cash to help finance the acquisition.
Since the June announcement, management of the two companies had generated a detailed integration strategy. Integration planning was led by Geoff Martha, Medtronic’s head of strategy and business development, who had spearheaded the acquisition. The benefits of the combination had been formally confirmed by both executive teams, and the cultural integration planning and leadership choices all seemed to be going positively.
However, financial aspects of the transaction were criticized by some long-time Medtronic shareholders,3 who would be forced to pay capital gains taxes, and some Obama administration members concerned about a reduction in government tax revenue.4 Nevertheless, Medtronic security analysts and its shareholders generally had praised the deal, bidding up Medtronic’s stock price from $60.70 prior to the announcement to $65.98 on September 22.5 (See Exhibit 2 for Medtronic’s recent stock price history.)
Ishrak decided to meet with Martha and veteran Chief Financial Officer Gary Ellis to discuss options and the implications of the Treasury announcement. Should Medtronic proceed with the acquisition now that the fiscal benefits of the deal had been materially reduced by the new Treasury rules? In addition, he was concerned about whether it would be possible to integrate 85,000 employees under one mission, and keep Medtronic on its positive course. Or would the challenges of integration slow the growth of both organizations?
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Medtronic’s History
Minnesota-based Medtronic was founded in 1949 by Earl Bakken and his brother-in-law Palmer Hermundslie as a repair shop for small medical equipment. In the late 1950s Bakken invented the world’s first external wearable pacemaker at the request of pioneering heart surgeon C. Walton Lillehei, MD at the University of Minnesota. By 1960 the company was involved in so many disparate research projects that it was out of capital and facing possible bankruptcy. Only a modest capital infusion of $200,000 from a new venture capital organization saved the company. Two of the venture capitalists joined the board and advised Bakken to narrow his focus to pacemakers and to write a mission for his company. Bakken then crafted the enduring Medtronic Mission, not a word of which has been changed since then.
Bakken later envisioned the use of medical technology far beyond the cardiovascular system. He even sketched out the figure of a human being and all the potential places in the body where medical technology could be applied. Bakken called this Medtronic’s 100-year Strategic Plan. By 1974, the company, which was selling its products in 70 countries, faced its first major crisis, as the Xytron pacemaker had thousands of battery failures causing severe reputational damage and loss of market share. As a result, Medtronic board member and former Tonka Toy CEO Dale Olseth became CEO of Medtronic in 1976, with Bakken remaining as chair of the board.
In 1985, after Medtronic’s second major pacemaker quality crisis, board member and Pillsbury President Winston Wallin became CEO and restored the company’s strategy and financial success. When Wallin retired in 1991, Bill George, who joined the company from Honeywell in 1989, became CEO. For a decade, George invested in ventures to create new medical therapies and heavily concentrated on R&D. Medtronic became known as an “innovation machine,” as it introduced breakthrough therapies for heart failure, cardiac surgery, incontinence, Parkinson’s disease, and spine surgery.
Art Collins succeeded George in 2001, and served until 2007 when he was succeeded by Chief Operating Officer Bill Hawkins. In the following years Medtronic’s growth slowed from the 18% compound growth rate achieved between 1986 and 2007 to a meager 1% as its core markets were flat or even declining.
In 2011, Ishrak joined Medtronic as CEO, after spending 16 years at General Electric. Ishrak began to reposition Medtronic as a healthcare solutions company grounded in key therapy areas and focused on three major strategies: 1) new therapies to improve clinical outcomes, 2) economic value to ensure cost efficiency across the continuum of care, and 3) globalization to increase access to quality healthcare for patients around the world.
Medtronic’s Dual Challenges: Accelerating Growth and Access to Cash
In the first three years of Ishrak’s tenure, his initiatives and strategies resulted in increasing Medtronic’s annual revenue growth to 4% constant currency, as Medtronic’s market capitalization rose from $37 billion in early 2011 to $57 billion in late 2013.6 (See Exhibits 3 and 4 for Medtronic financials.) That fall Ishrak was searching for ways to accelerate Medtronic’s growth, possibly with a major acquisition or purchase of a series of smaller companies, a task he delegated to Martha.
He was also concerned about the availability of cash resources in the U.S. to meet Medtronic’s dividend and stock buyback commitments to its shareholders. Medtronic did not have access to $13.5 billion of its cash trapped outside the U.S. Like the majority of U.S. based corporations, Medtronic
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retained cash overseas to avoid paying the difference between the lower taxes it paid in foreign markets and the 35% U.S. tariff, one of the highest corporate tax rates in the world.a
At that time shareholders were pushing for increased cash returns. Medtronic expectations were high since the company’s dividends had grown by 8% per annum, and the company was using debt to increase its liquidity.7 One analyst reported: “Apple and other corporations are unwilling to repatriate the money and pay high U.S. taxes on it, so they are borrowing money instead to satisfy investors.”8
The Challenge at Covidien
Covidien’s origin dated back to 1903, when Henry P. Kendall founded a small textile company in Massachusetts. In 1988, Kendall Company merged with several medical device entities to form Kendall International, one of the world’s largest manufacturers of disposable medical supplies. In 1994, the company was acquired by Tyco and became the basis for Tyco Healthcare, which soon grew intoTyco’s most profitable divison.9
Tyco CEO Dennis Kozlowski was popular with Wall Street for his aggressive merger and acquisition strategy, but was embroiled in several scandals. In 2002, he was indicted for evading 8.25% sales tax on artwork worth $15 million.10 The inspection of Tyco led to new criminal charges, for which he was convicted of taking unauthorized bonuses, abusing corporate loan programs, falsifying records, and conspiracy for a value of nearly $100 million.11 For these crimes, he served six and a half years in prison and paid $167 million in restitution and fines.12
After the scandal broke, Ed Breen became Tyco’s CEO in 2002, where he found a company burdened by massive debt and an obsession with deals. “I banned the word acquisition when I came,”13 said Breen. “Tyco was acquisitions on steroids.”14 One Tyco executive commented: “Ed brought visibility, stability, vision, and a sense of purpose to the table.”15
In 2007, Tyco spun out its healthcare business as a new public entity named Covidien, which had 43,000 employees and nearly $10 billion in annual revenue.16 Under CEO Rich Meelia, Covidien’s reputation grew through poduct innovation and acquisitions to access new technology and strengthen Covidien’s entrance to new markets.17 Covidien’s operational base was in Mansfield, MA, but the company was incorporated in Bermuda; in 2009 it moved its legal headquarters to Ireland.18 In a 2008 statement, the company said:
Ireland has a stable economic, legal and regulatory environment and enjoys strong relationships as a member of the European Union. Additionally, Ireland enjoys a long history of international investment and a good network of tax treaties with the United States, the European Union and several other countries where Covidien has major operations.19
In 2011 José Almeida was promoted to CEO from head of medical devices, which contributed two- thirds of the company’s total annual revenues and three-quarters of its operating profit.20 In 2013, Covidien was named one of the world’s most innovative companies by Forbes and made the Thomson Reuters Top 100 Global Innovators list.21
a In 2013, at least 362 companies, representing 72% of the Fortune 500, maintained subsidiaries in offshore tax havens. Pfizer, the world’s largest drug maker, operated 128 subsidiaries in tax heavens and held $69 billion in profit offshore. (Source: Richard Phillips, Steve Wamhoff, and Dan Smith, “Offshore Shell Games,” U.S. PIRG Education Fund and Citizens for Justice, June 4, 2014, http://ctj.org/ctjreports/2014/06/offshore_shell_games_2014.php#.WEqUdrIrLIU, accessed December 2016.)
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http://ctj.org/ctjreports/2014/06/offshore_shell_games_2014.php#.WEqUdrIrLIU
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By 2013, Almeida had become concerned about Covidien’s ability to sustain its growth.22 To investigate strategic options, he commissioned McKinsey consultants to evaluate opportunities to expand through acquisition or merger, or even be sold to another company. While competitive pressures made multi-acquisitions of smaller companies a less sustainable strategy, Medtronic seemed to be a possible business match, as its strategies and Covidien’s were aligned. To spur organic growth, Almedia recognized Covidien would have to move up-market in terms of technology, seeking more complex pre-market approvals (PMAs) for new products from the U.S. Food and Drug Administration,23 adding substantial resources in clinical trials and regulatory affairs—capabilities in which Medtronic was a market leader in medical technology.24
The company was half the size of Medtronic in terms of revenue, but had almost as many employees, in part due to several labor-intensive functions. As Martha noted, “One big difference was that Medtronic needed only half the people to close the books and report results. In contrast, Covidien needed to implement a major architectural redesign of its business systems, as it never converted to integrated applications, nor consolidated any of its factories.” (See Exhibits 5 and 6 for Covidien financials.)
Medtronic’s Search for a Major Acquisition
In the fall of 2013, Ishrak and Martha’s business development team at Medtronic was preparing for the next growth push and planned to present multiple options to the company’s board. The CEO was considering the possibility of a major acquisition to accelerate growth in a consolidating healthcare market where scale would make a significant difference. In addition, by diversifying revenue streams, Ishrak believed Medtronic could deliver more consistent results for investors. He was clear that potential targets had to be aligned with Medtronic’s mission, “tenet by tenet.”
In preparation for a board meeting, Martha and Ellis analyzed several acquisitions that could expand Medtronic’s business into additional body systems that treated disease states not addressed by Medtronic’s current product portfolio. Covidien was one of the companies selected as a case study to show the synergies that might be possible with a major acquisition, including increased product breadth as well as the consolidation of business services, information technology, human resources, and finance. Covidien also potentially offered Medtronic access to much of Medtronic’s “trapped” overseas cash, but Ishrak was clear that strategy must take precedence over financial engineering.
The board was interested to learn more and a dedicated meeting with Medtronic’s finance committee was set for the next quarter to deepen the business analysis of Covidien and other potential acquisitions. Covidien was of particular interest to Medtronic’s management team. Ishrak remarked, “Covidien had similar strategies to our own, as they had a focus on globalization and economic value. So we believed there were some strategic and cultural similarities between Medtronic and Covidien.”
In the meantime, Almeida placed a call into Ishrak in March 2014. Ishrak sensed that Almeida was interested in either selling some of Covidien’s businesses to Medtronic or buying some of Medtronic’s businesses, but did not know any specifics. When the two CEOs met for dinner a few weeks later, Almeida proposed a possible strategic agreement that would involve Covidien’s acquisition by Medtronic. As Ishrak recalled:
Joe presented Covidien’s case very well. He explained that Covidien’s plan was to expand its value chain in healthcare and the company needed to improve its clinical side of the business in order to develop further, which would require high investments. Covidien was considering two immediate options, either to be acquired by another
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company that had clinical skills or to buy a company that already had the clinical business developed or was on its way to development. They concluded that they preferred to be acquired. I told Joe that Covidien’s proposal was very interesting but I needed time to look into the deal. I made it clear from the beginning that I was unwilling to compromise on two things: Medtronic’s mission and our name.
Ishrak believed that, “in any business integration, especially one of this complexity and size, companies should not fight on mission and name; fighting over those two elements compounds all other problems by an order of magnitude at least.” The two leaders easily agreed on the mission alignment and the name. Almeida also proposed that Ishrak be CEO of the combined companies and offered his help during the integration process with Covidien.
After the meeting with Almeida, Ishrak called Richard Anderson, Medtronic’s lead director, who was chairman and chief executive of Delta Airlines at the time. He described his conversation with Almeida, and asked for Anderson’s point of view about the possible deal with Covidien. Anderson looked at Covidien’s business profile in connection with Medtronic and was very supportive of the deal. Ishrak then discussed the possible transaction with Ellis and Martha, and agreed on next steps.
In the meantime, Medtronic’s finance committee was scheduled to meet the day before the board meeting. Martha used Covidien as a business case study, but did not disclose the ongoing discussion, as Ishrak considered it inappropriate to discuss the news of Covidien’s proposal with only a partial group of board members. At the board meeting the next day, Medtronic’s board members reacted favorably to the news of a possible acquisition of Covidien. Ishrak said, “After we went through the strategic rationale for the proposed acquisition, I asked the board, ‘Do we still want to go ahead with the discussions?’ All board members voted ‘yes.’”
Subsequently, Martha worked with Amy Wendell, Covidien’s business development executive, to outline the transaction process and what they needed to do to sign a deal. Principally, they wanted to expand each other’s understanding of mutual business opportunities to create a foundation that would help assemble a strategy for combining companies. Even at this early stage, Martha and Wendell discussed the basics of the integration process as well. Following that discussion, Ishrak, Ellis, and Martha met with Covidien CFO Charles Dockendorff and Wendell in Paris to further discuss the deal. After the meeting, Ellis reflected, “We realized this is something that could enhance the Medtronic mission and drive growth for both companies.”
Following the Paris meeting, the two companies set up a joint diligence team of twenty people selected from both companies to work on the business and leadership integration between the two organizations. Ishrak explained: “We mapped each other’s business profiles to look for overlaps and synergies.”
By the second meeting, Martha said, “People were finishing each other’s sentences from the other side of the table. We walked away certain that there was an alignment on the strategic vision. You could tell that Covidien people were patient-focused. They had good technology and good chemistry on their leadership team.”
Organization of the New Medtronic
As a next step, Ishrak turned to Carol Surface, Medtronic’s head of human resources, Martha, and the business group leaders of both companies to determine how to structure the new Medtronic. Martha took the leadership of the integration project, supported by representatives from each company participating in the acquisition.
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As part of the plan, Medtronic would be organized in four business units and four geographic regions: 1) Americas, 2) Greater China, 3) Europe, Middle East and Africa, and 4) Asia Pacific. The business units would be: cardiac and vascular, diabetes, restorative therapies, and minimally invasive therapies, the new name for Covidien’s business units, which would be led by senior Covidien executive Bryan Hanson. The Asia Pacific region (excluding China) would report to Covidien’s Bob White, ensuring that the acquired company had at least two members of the powerful Medtronic executive committee. It was determined that all business units, geographies and corporate functions would report to the CEO.
Each business unit was asked to develop a unique business model based on shared guiding principles. Ishrak was personally engaged in sharing these common principles with the leaders of the business units. As a key part of the integration strategy, Ishrak and Martha described their vision for transforming healthcare. Martha recalled: “We used two things to engage people. First, we highlighted the importance of preserving what was already in place, especially in terms of skills. Then we redesigned the workflow, using the integration process to create a platform that would transform healthcare.” The integration process highlighted synergies that could be achieved by shifting two of Covidien’s business units, neuro vascular and peripheral vascular, into Medtronic’s larger business sectors in restorative therapies and cardiac and vascular therapies. The Medtronic teams were especially excited about Covidien’s products to treat peripheral vascular disease and stroke.
In order to facilitate the integration process, Martha worked with Surface’s team to study the alignment of the companies’ cultures using a robust combination of executive interviews, focus groups and a survey sent to more than 5,400 Medtronic and Covidien employees. The survey measured 11 dimensions of the cultures of both companies that were determined to be critical during the due diligence phase. The results showed strong alignment of eight of the 11 elements; most importantly, Covidien’s employees recognized the value of Medtronic’s mission. The main cultural difference that emerged between the two companies was related to the leadership style. Covidien valued fast-paced decision-making and execution, while Medtronic valued a more collaborative approach that often required more time to reach leadership alignment. As Martha noted, “Covidien was more top-down and focused on financial results, with an attitude of ‘You missed the numbers, you are fired,’ whereas Medtronic was more collaborative and gave people a second or third chance.”
Challenges
Finally, in May 2014, after the companies’ executives agreed on the integration plan, it was time to develop scenarios about the financials and the price of the acquisition. Medtronic leaders were careful not to make an offer so low as to lose their trust after such collaboration. Under the terms of the transaction, each ordinary outstanding shareholder of Covidien would receive 40% in cash and 60% of an ordinary share of the new Medtronic, as of the closing date. Per the same agreement, each common stock outstanding shareholder of Medtronic would receive one ordinary share of the new Medtronic.
The main challenge on Medtronic’s side was the topic of tax inversion. Medtronic assumed it would use $13.5 billion in cash held overseas to fund part of the transaction, and increase access to future cash generated overseas. The alternative would be for Medtronic to leave its legal headquarters in the U.S. and continue to raise more debt to fund shareholder returns. Medtronic had committed to return 50% of the company’s free cash flow to its shareholders, which absorbed a significant amount of liquidity, making it difficult for Medtronic to invest heavily in the U.S. without borrowing.
Ellis noted, “We realized that this transaction was financially justified with or without the tax inversion, but we also were concerned that pulling Covidien back into the U.S. global tax system would destroy value, which was hard to justify.” Martha added:
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The inversion was a big question mark in our minds. The board members, Ellis and I all questioned it. It offered financial flexibility as we could bring cash into the U.S. and deploy it by investing in Medtronic’s development. This in turn would create new jobs in the country. We had also studied different cases to anticipate possible scenarios.
At Medtronic, executives conducted extensive due diligence to understand the financials of the acquisition. Ishrak asked the board the following questions: “Is our financial model credible? Does the integration plan make sense? Does our value proposition make Medtronic’s numbers attractive enough in terms of earnings, return on investment capital, and other financial metrics?” The team also examined the likelihood of tax reform to lower corporate taxes in the U.S. As Martha explained:
Many believed that fiscal reform was imminent. We did some polling and hired experts in the government field. We also paid attention to the communications side of the deal as we did not want to hurt Medtronic’s reputation. It had to be clear that the top priorities for Medtronic were preserving innovation, customer relationships, and the front end of the business. If we could only do that and missed our cost synergies, we would still feel successful.
The deal with Covidien would be one of the biggest in the healthcare sector; its failure would harm the reputation of Medtronic and of the executives involved. Martha explained, “Omar and I knew that the deal could potentially disrupt Medtronic’s growth and impair its reputation.”
One night when we were both in Washington D.C., we had dinner together and laid out all the opportunities and risks related to the Covidien acquisition. The risks were high, so I asked Omar: “Are you sure that you want to do this? You can just stay the course we are on, steadily improving the growth of our current businesses, and have a great career here, retire, and be a hero for restoring Medtronic. If it doesn’t work out, people are going to lose their jobs, and it’s going to start with you and me.”
Ishrak responded:
This opportunity is so big in having an impact on transforming healthcare that we have to focus on that possibility. It will improve our access to emerging markets and bring down costs in more developed markets. It gives us the platform to do that. How do we wake up in the morning a year from now, look ourselves in the mirror, and say we walked away from an opportunity this big to transform healthcare because there were risks? I can’t do that. That was one of those unique moments that I will never forget where you put your career on the line.
When rumors of Medtronic’s acquisition spread in Covidien, tension arose among the company employees, especially those who had not been privy to any preparatory discussions. Medtronic was notoriously efficient and process oriented in eliminating functional duplications. Bryan Hanson, former group president of Covidien’s medical devices business, recalled:
My initial reaction was negative when I heard about the possibility for Medtronic to acquire Covidien. Covidien had been able to build a reputable name in a relatively short amount of time and we were looking for opportunities to scale the business. From an organizational perspective, I was afraid that there could be too much change too fast. However, after my first meeting with Ishrak, who has an incredible combination of humility and intelligence, I was attracted by his idea of transforming not only this company, but the entire healthcare sector. That would be some exciting achievement.
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The Integration Process
The integration was put in the context of Medtronic’s strategy and was inspired by four guiding principles. This process was coherent with the idea that Covidien’s acquisition was conceived for strategic reasons and was not intended as merely financial engineering.
1. Preserve: Maintain positive business momentum at both legacy companies. This would be the process that would merge Medtronic and Covidien strategic plans based on customer protection and valorization of change versus disruption.
2. Optimize: Exceed Medtronic’s announced cost synergy targets and reinvest in the business. Cost reduction would be based on rigorous execution of operations and optimized service models, along with consolidated corporate services.
3. Accelerate: Enable significant near-term growth for the new Medtronic. The company would utilize new assets and capabilities to access emerging markets and introduce more effective growth strategies.
4. Transform: Take a leading role in the technology-enabled transformation of healthcare. The new Medtronic would offer broader healthcare solutions through new business models and offerings to new customers.
From the beginning, the deal with Covidien was driven primarily by opportunities to sustain revenue growth, not by cost cutting. The benefits of this integration process could immediately manifest because of the complementary business characteristics of each company, with cost cutting activity mainly limited to headquarters functions and enabling infrastructure like sourcing and IT. On the healthcare side, the acquisition would offer a bigger platform to transform healthcare. From a financial perspective, business diversification also provided stability for financial outcomes.
Preparing for the Announcement
In late May 2014, Medtronic’s board discussed whether to pursue the tax inversion. Medtronic’s financial scenarios would work with or without the tax inversion. Relocating the company headquarters to Ireland would give Medtronic the ability to free cash for investments in research and development, automation and capital expenditures, and increase returns to shareholders. On the other hand, leaving Medtronic’s legal headquarters in Minnesota would harm Covidien shareholders by having to adjust to the much higher U.S. tax rates for all revenues generated outside the U.S. Not just fiscal benefits were at stake. Leaving the U.S. could compromise decades of historical interaction with the state of Minnesota.
As background, Medtronic’s board also examined what happened when Medtronic acquired California-based MiniMed in 2001. Martha recalled: “We said we would invest money locally and create growth. In the case of MiniMed, the number of employees working for the company in the U.S. went from 1,500 to 7,000 with an average salary of $80,000, compared to the average U.S. household income of $52,000.” That gave management and the board the confidence to proceed with the acquisition, including the tax inversion. As a result, the official announcement was planned for June 14, 2014.
Given the potential controversy within Minnesota about relocating Medtronic legal headquarters to Ireland, Ishrak and Martha decided to be fully transparent with the state government about Medtronic’s plan not to leave its home state behind. To make this commitment tangible, and assuage
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any concerns that Medtronic was abandoning Minnesota, Ishrak had conversations with Governor Mark Dayton and Minnesota’s U.S. Senators. He committed that Medtronic’s operational headquarters would remain in Minnesota, the company would add 1,000 jobs within the state over the next five years, and would invest expanded cash resources in the U.S.—an additional $10 billion above current strategic plans—over the next decade. At the time of the announcement, Governor Dayton commented publicly: “We were assured that no jobs would be lost due to Covidien’s acquisition. That was tremendous news for Minnesota and evidences the company’s continued commitment to our state.”25
Ishrak had adopted the same degree of attention for Medtronic’s sites already active in Ireland since 1999. In Dublin and Galway, he considered those branches as “centers of excellence for the development and manufacture of a number of the company’s key medical technologies for the treatment and management of cardiovascular and cardiac rhythm disease.”26
In the week following the public announcement, Medtronic received rating upgrades. As one analyst noted, “Medtronic’s acquisition of Covidien is by far the biggest and boldest move of the Omar Ishrak era at the company. Strategically, the acquisition of Covidien builds on Medtronic’s breadth, but more importantly it brings to Medtronic a better mix of businesses […] We are upgrading Medtronic to Overweight and raising our price target from $64 (Dec-14) to $78 (Dec-15).”27
New Rules on Tax Inversions
As the integration process progressed, Ishrak was pleased that they confirmed the deal’s strategic benefits, but was troubled by the complexities of the decision and the ever-changing fiscal and tax environment he was facing. From the outset, he recognized that the Covidien acquisition would strengthen Medtronic’s ability to fulfill its mission in restoring patients by broadening its range of diseases impacted, demonstrating the economic value of its offerings, and accelerating its innovation pipeline, giving the company greater capacity to impact global markets.
However, Medtronic encountered some vocal criticism from two sources: first, on the national scene Medtronic was seen as escaping its obligations to pay U.S. taxes. Medtronic would continue to pay full taxes on all revenues generated in the U.S., but not on overseas earnings. This was seen by many politicians and the media as gaining benefits from being in the U.S. but not paying its fair share of the tax burden.28 Martha noted, “The tax inversion was a big deal. People feared that we would execute the transaction only to relocate jobs outside the U.S. and pay lower taxes. Analysts were asking, ‘Why are you doing this? Is it just for taxes?’ We had to reiterate that it was because of a planned strategy.”
In addition, some of its retirees and long-time shareholders were very upset about being forced to pay capital gain taxes on their current stock holdings; in some cases, they had held very large gains in their personal portfolios which they intended to pass on tax-free to their heirs at the time of their death. Several wrote critical letters to the local newspaper voicing their concerns.29 At the annual shareholders meeting in August 2014, the son of former lead director Richard Schall, who was quite ill at the time, and subsequently passed away, voiced his father’s concerns very directly to the applause of many retirees at the meeting.30
By September 2014, Medtronic and Covidien were ready to close the deal, as shareholders of both companies indicated they would vote favorably for the deal. All that remained were required approvals from the U.S. Federal Trade Commission and the European Union. Then on September 22, 2014, the U.S. Treasury changed the tax inversion rules. Treasury Secretary Lew said that the measures would take effect for any deal that is not closed by Monday, September 29, 2014. He stated: “Currently proposed inversions will no longer be applicable after the announcement.”31
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The new regulation, applied to a financial system which had become full of inefficiencies and special-interest loopholes,32 would block inverted companies from transferring cash of property from what was known as a “controlled foreign corporation” to the new parent company to avoid U.S. taxes.33 In fact, tax inversions had surged in popularity among pharmaceutical and life-science companies. Since the beginning of 2014, there had been ten inversion deals. (See Exhibit 7 for more information on tax inversions.)
The new rules also had immediate implications for Pfizer’s attempt to merge with Ireland-based Allergan. Pfizer had justified its $106 billion offer for AstraZeneca by combining research and development sites to reduce costs and by changing its legal domicile to Britain to take advantage of lower tax rates. It would pay for 32% of the purchase with cash trapped overseas.34
Martha commented on Lew’s announcement:
Mission, strategy, growth projections, and operating leverage were all still positive. It was only a question of how we pay for it. There were different ways of financing our transaction, but the method of using the $13.5 billion in overseas cash was the most efficient. With the Treasury announcement, we believed we had sufficient debt capacity that we could borrow to cover for that. Our analysis showed this could still be done but there would be a substantial interest cost of approximately 3.5% on the borrowed funds.
Ellis concurred with Martha’s assessment: “We knew this was still a good deal even without access to the overseas cash. Medtronic has the benefit of a very strong balance sheet, with lots of debt capacity. Our bankers and rating agencies believed we could borrow $17 billion without hurting our financial stability. But there would be added interest costs and political uncertainties.”
Decision Time
As Ishrak met with his key executives to discuss the implications of the Treasury Department’s new inversion rules, and examined other ways to finance the acquisition, he asked each person these questions: Is this acquisition worth pursuing in light of the new rules on inversions? Is it so large that it will throw Medtronic off its current growth trajectory? What other hurdles might the administration put in place? Could they jeopardize Medtronic’s ability to successfully acquire and integrate Covidien? Are the strategic benefits great enough to outweigh these concerns?
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
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Exhibit 1 Medtronic Mission and Medallion
To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.
To direct our growth in the areas of biomedical engineering where we display maximum strength and ability; to gather people and facilities that tend to augment these areas; to continuously build on these areas through education
and knowledge assimilation; to avoid participation in areas where we cannot make unique and worthy contributions.
To strive without reserve for the greatest possible reliability and quality in our products; to be the unsurpassed standard of comparison and to be recognized as a company of dedication, honesty, integrity, and service.
To make a fair profit on current operations to meet our obligations, sustain our growth, and reach our goals.
To recognize the personal worth of employees by providing an employment framework that allows personal satisfaction in work accomplished, security, advancement opportunity, and means to share in the company’s success.
To maintain good citizenship as a company.
Source: Medtronic website, http://www.medtronic.com/us-en/about/mission.html, accessed December 2016.
Exhibit 2 Medtronic PLC’s Stock Price, September 2004–2014
Source: Capital IQ, accessed December 2016.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
http://www.medtronic.com/us-en/about/mission.html
317-031 Medtronic: Making the Big Leap Forward (A)
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Exhibit 3 Medtronic Income Statement (in $ millions), 2011–2014
For the Fiscal Period Ending
Reclassified
12 months
Apr-29-2011
Reclassified
12 months
Apr-27-2012
Reclassified
12 months
Apr-26-2013
Reclassified
12 months
Apr-25-2014
Currency USD USD USD USD
Revenue 15,508.0 16,184.0 16,569.0 16,893.0
Other Revenue – – – –
Total Revenue 15,508.0 16,184.0 16,569.0 16,893.0
Cost Of Goods Sold 3,689.0 3,889.0 4,095.0 4,211.0
Gross Profit 11,819.0 12,295.0 12,474.0 12,682.0
Selling General & Admin Exp. 5,427.0 5,623.0 5,698.0 5,847.0
R & D Exp. 1,472.0 1,490.0 1,557.0 1,477.0
Depreciation & Amort. – – – –
Amort. of Goodwill and Intangibles 339.0 335.0 331.0 349.0
Other Operating Expense/(Income) 162.0 169.0 114.0 214.0
Other Operating Exp., Total 7,400.0 7,617.0 7,700.0 7,887.0
Operating Income 4,419.0 4,678.0 4,774.0 4,795.0
Interest Expense (450.0) (349.0) (388.0) (379.0)
Interest and Invest. Income 172.0 200.0 237.0 271.0
Net Interest Exp. (278.0) (149.0) (151.0) (108.0)
Currency Exchange Gains (Loss) 61.0 (195.0) 27.0 43.0
Other Non-Operating Inc. (Exp.) – – – –
EBT Excl. Unusual Items 4,202.0 4,334.0 4,650.0 4,730.0
Restructuring Charges (270.0) (87.0) (182.0) (88.0)
Merger & Related Restruct. Charges (14.0) (12.0) 49.0 (117.0)
Impairment of Goodwill – – – –
Gain (Loss) On Sale Of Invest. – – (21.0) (10.0)
Asset Writedown (9.0) – – –
Legal Settlements (245.0) (90.0) (245.0) (770.0)
Other Unusual Items – – – (40.0)
EBT Incl. Unusual Items 3,664.0 4,145.0 4,251.0 3,705.0
Income Tax Expense 609.0 730.0 784.0 640.0
Earnings from Cont. Ops. 3,055.0 3,415.0 3,467.0 3,065.0
Earnings of Discontinued Ops. 41.0 202.0 – –
Extraord. Item & Account. Change – – – –
Net Income to Company 3,096.0 3,617.0 3,467.0 3,065.0
Minority Int. in Earnings – – – –
Net Income 3,096.0 3,617.0 3,467.0 3,065.0
Pref. Dividends and Other Adj. – – – –
NI to Common Incl Extra Items 3,096.0 3,617.0 3,467.0 3,065.0
NI to Common Excl. Extra Items 3,055.0 3,415.0 3,467.0 3,065.0
Per Share Items
Basic EPS $2.87 $3.43 $3.4 $3.06
Basic EPS Excl. Extra Items 2.84 3.24 3.4 3.06
Weighted Avg. Basic Shares Out. 1,077.4 1,053.9 1,019.3 1,002.1
Source: Capital IQ, accessed December 2016.
Note: In millions of the reported currency, except per share items.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
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Exhibit 4 Medtronic Balance Sheet (in $ millions), 2011–2014
Balance Sheet as of: Restated
Apr-29-2011
Restated
Apr-27-2012
Restated
Apr-26-2013 Apr-25-2014
Currency USD USD USD USD
ASSETS
Cash And Equivalents 1,382.0 1,172.0 919.0 1,403.0
Short Term Investments 1,046.0 8,132.0 10,161.0 12,771.0
Trading Asset Securities – 46.0 50.0 80.0
Total Cash & ST Investments 2,428.0 9,350.0 11,130.0 14,254.0
Accounts Receivable 3,761.0 3,808.0 3,727.0 3,811.0
Other Receivables – 703.0 539.0 736.0
Total Receivables 3,761.0 4,511.0 4,266.0 4,547.0
Inventory 1,619.0 1,800.0 1,712.0 1,725.0
Prepaid Exp. 541.0 601.0 594.0 603.0
Deferred Tax Assets, Curr. 523.0 – – –
Other Current Assets 278.0 74.0 150.0 81.0
Total Current Assets 9,150.0 16,336.0 17,852.0 21,210.0
Gross Property, Plant & Equipment 5,732.0 5,796.0 6,152.0 6,439.0
Accumulated Depreciation (3,244.0) (3,323.0) (3,662.0) (4,047.0)
Net Property, Plant & Equipment 2,488.0 2,473.0 2,490.0 2,392.0
Long-term Investments 6,225.0 1,114.0 1,024.0 894.0
Goodwill 9,520.0 9,934.0 10,329.0 10,593.0
Other Intangibles 2,725.0 2,647.0 2,673.0 2,286.0
Deferred Tax Assets, LT 314.0 – – –
Other Long-Term Assets 253.0 314.0 532.0 568.0
Total Assets 30,675.0 32,818.0 34,900.0 37,943.0
LIABILITIES
Accounts Payable 495.0 565.0 681.0 742.0
Accrued Exp. 2,058.0 1,854.0 2,037.0 2,918.0
Short-term Borrowings 1,500.0 950.0 125.0 337.0
Curr. Port. of LT Debt 221.0 2,310.0 771.0 1,262.0
Curr. Port. of Cap. Leases 2.0 14.0 14.0 14.0
Curr. Income Taxes Payable 50.0 154.0 88.0 164.0
Def. Tax Liability, Curr. 7.0 14.0 16.0 19.0
Other Current Liabilities 393.0 66.0 218.0 103.0
Total Current Liabilities 4,726.0 5,927.0 3,950.0 5,559.0
Long-Term Debt 8,080.0 7,239.0 9,607.0 10,187.0
Capital Leases 32.0 165.0 152.0 139.0
Def. Tax Liability, Non-Curr. 461.0 276.0 340.0 386.0
Other Non-Current Liabilities 1,408.0 2,098.0 2,180.0 2,229.0
Total Liabilities 14,707.0 15,705.0 16,229.0 18,500.0
Common Stock 107.0 104.0 102.0 100.0
Additional Paid In Capital – – – –
Retained Earnings 16,085.0 17,482.0 19,061.0 19,940.0
Treasury Stock – – – –
Comprehensive Inc. and Other (224.0) (473.0) (492.0) (597.0)
Total Common Equity 15,968.0 17,113.0 18,671.0 19,443.0
Total Equity 15,968.0 17,113.0 18,671.0 19,443.0
Total Liabilities And Equity 30,675.0 32,818.0 34,900.0 37,943.0
Source: Capital IQ, accessed December 2016.
Note: In millions of the reported currency, except per share items.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
317-031 Medtronic: Making the Big Leap Forward (A)
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Exhibit 5 Covidien, PLC, Income Statement (in $ millions), 2011–2014
For the Fiscal Period Ending
Reclassified
12 months
Sep-30-2011
Reclassified
12 months
Sep-28-2012
12 months
Sep-27-2013
12 months
Sep-26-2014
Currency USD USD USD USD
Revenue 9,607.0 9,851.0 10,189.0 10,596.0
Other Revenue – – – –
Total Revenue 9,607.0 9,851.0 10,189.0 10,596.0
Cost Of Goods Sold 3,847.0 3,922.0 4,100.0 4,245.0
Gross Profit 5,760.0 5,929.0 6,089.0 6,351.0
Selling General & Admin Exp. 3,118.0 3,189.0 3,343.0 3,348.0
R & D Exp. 412.0 479.0 508.0 546.0
Depreciation & Amort. – – – –
Other Operating Expense/(Income) – – – –
Other Operating Exp., Total 3,530.0 3,668.0 3,851.0 3,894.0
Operating Income 2,230.0 2,261.0 2,238.0 2,457.0
Interest Expense (203.0) (206.0) (208.0) (204.0)
Interest and Invest. Income 19.0 15.0 16.0 15.0
Net Interest Exp. (184.0) (191.0) (192.0) (189.0)
Currency Exchange Gains (Loss) – – – –
Other Non-Operating Inc. (Exp.) 29.0 30.0 71.0 16.0
EBT Excl. Unusual Items 2,075.0 2,100.0 2,117.0 2,284.0
Restructuring Charges (121.0) (87.0) (109.0) (185.0)
Merger & Related Restruct. Charges (32.0) (37.0) – (48.0)
Impairment of Goodwill – – 18.0 –
Gain (Loss) On Sale Of Invest. (7.0) 4.0 20.0 4.0
Gain (Loss) On Sale Of Assets – – – 107.0
Asset Writedown – (3.0) – (28.0)
In Process R & D Exp. – – – (94.0)
Legal Settlements (35.0) (49.0) – (246.0)
Other Unusual Items – (9.0) (17.0) 29.0
EBT Incl. Unusual Items 1,880.0 1,919.0 2,029.0 1,823.0
Income Tax Expense 299.0 282.0 429.0 161.0
Earnings from Cont. Ops. 1,581.0 1,637.0 1,600.0 1,662.0
Earnings of Discontinued Ops. 287.0 268.0 100.0 –
Extraord. Item & Account. Change – – – –
Net Income to Company 1,868.0 1,905.0 1,700.0 1,662.0
Dividends per Share $0.83 $0.94 $1.04 $1.28
Payout Ratio % 21.2% 22.8% 28.6% 34.8%
Source: Capital IQ, accessed December 2016.
Note: In millions of the reported currency, except per share items.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
Medtronic: Making the Big Leap Forward (A) 317-031
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Exhibit 6 Covidien, PLC, Balance Sheet (in $ millions), 2011–2014
Balance Sheet as of:
Sep-30-2011 Sep-28-2012 Sep-27-2013 Sep-26-2014
Currency USD USD USD USD
ASSETS
Cash And Equivalents 1,503.0 1,866.0 1,868.0 1,567.0
Total Cash & ST Investments 1,503.0 1,866.0 1,868.0 1,567.0
Accounts Receivable 1,744.0 1,702.0 1,601.0 1,619.0
Other Receivables 160.0 5.0 293.0 16.0
Total Receivables 1,904.0 1,707.0 1,894.0 1,635.0
Inventory 1,513.0 1,772.0 1,352.0 1,408.0
Prepaid Exp. 328.0 337.0 297.0 406.0
Deferred Tax Assets, Curr. 525.0 590.0 456.0 438.0
Other Current Assets – – – –
Total Current Assets 5,773.0 6,272.0 5,867.0 5,454.0
Gross Property, Plant & Equipment 5,335.0 5,780.0 4,547.0 4,580.0
Accumulated Depreciation (2,630.0) (2,908.0) (2,535.0) (2,556.0)
Net Property, Plant & Equipment 2,705.0 2,872.0 2,012.0 2,024.0
Long-term Investments – – – –
Goodwill 7,683.0 8,542.0 8,172.0 8,851.0
Other Intangibles 2,764.0 3,085.0 2,687.0 3,282.0
Deferred Tax Assets, LT – 193.0 163.0 193.0
Other Long-Term Assets 1,449.0 1,293.0 1,017.0 897.0
Total Assets 20,374.0 22,257.0 19,918.0 20,701.0
LIABILITIES
Accounts Payable 576.0 589.0 501.0 501.0
Accrued Exp. 814.0 898.0 785.0 861.0
Curr. Port. of LT Debt 5.0 509.0 11.0 1,009.0
Curr. Port. of Cap. Leases 6.0 – – –
Curr. Income Taxes Payable 97.0 53.0 541.0 60.0
Other Current Liabilities 902.0 863.0 801.0 857.0
Total Current Liabilities 2,400.0 2,912.0 2,639.0 3,288.0
Long-Term Debt 4,154.0 4,531.0 5,018.0 4,035.0
Capital Leases 43.0 – – –
Def. Tax Liability, Non-Curr. 745.0 828.0 605.0 679.0
Other Non-Current Liabilities 3,215.0 3,421.0 2,414.0 2,579.0
Total Liabilities 10,557.0 11,692.0 10,676.0 10,581.0
Common Stock 103.0 104.0 97.0 91.0
Additional Paid In Capital 6,844.0 7,179.0 7,549.0 7,842.0
Retained Earnings 3,908.0 5,365.0 3,514.0 2,121.0
Treasury Stock (1,436.0) (2,368.0) (2,210.0) (139.0)
Comprehensive Inc. and Other 398.0 285.0 292.0 145.0
Total Common Equity 9,817.0 10,565.0 9,242.0 10,060.0
Minority Interest – – – 60.0
Total Equity 9,817.0 10,565.0 9,242.0 10,120.0
Total Liabilities And Equity 20,374.0 22,257.0 19,918.0 20,701.0
Source: Capital IQ, accessed December 2016.
Note: In millions of the reported currency, except per share items.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
317-031 Medtronic: Making the Big Leap Forward (A)
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Exhibit 7 Tax Inversions and Reincorporations
Tax inversions described U.S. companies that either acquired or created a new company in another country with a lower corporate tax rate and then used that country at its home base thus avoiding U.S. corporate taxes (rate of 39.1%), which were the highest in the 34 industrialized nations of the Organization for Economic Cooperation and Development (OECD). Tax inversions slowed in the U.S. in the early 2000s as Congress took action to prevent them (signing an anti-inversion bill in 2004). However, companies eventually found exceptions in the law to get mergers & acquisitions with tax inversion and reincorporations approved. In 2012 and 2013 there were four deals completed involving U.S. firms that acquired companies outside of the U.S. There were three additional deals (either completed or pending approval) between January 2014 and September 19, 2014.
Year U.S. Company
Foreign
Acquisition Target
Country of New
Incorporation
2014 Applied Materials Tokyo Electron Netherlands
2014 AbbVie Shire Ireland
2014 Burger King Tim Hortons Canada
2014 Pfizer AstraZeneca U.K.
2014 Horizon Pharma Vidara Therapeutics Ireland
2014 Endo International Paladin Labs Ireland
2014 Mylan Abbott Laboratories Netherlands
2014 Endo Health Solutions Paladin Labs Ireland
2014 Liberty Global Virgin Media U.K.
2014 Walgreens Alliance Boots Switzerland
2013 Perrigo Elan Ireland
2013 Actavis Warner Chilcott Ireland
2013 Liberty Global Virgin Media U.K.
2013 Tower Group Canopius Holdings Bermuda
2012 Stratasys Objet Israel
2012 Eaton Cooper Industries Ireland
2012 Tronox Exxaro Resources Australia
2012 Jazz Pharmaceuticals Azur Pharma Ireland
Source: Bloomberg, http://www.bloomberg.com/graphics/infographics/tax-runaways-tracking- inversions.html, accessed December 7, 2016; Tax Foundation, “Corporate Income Tax Rates around the World, 2014,” http://taxfoundation.org/article/corporate-income-tax- rates-around-world-2014, accessed December 7, 2016.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
http://www.bloomberg.com/graphics/infographics/tax-runaways-tracking-inversions.html
http://www.bloomberg.com/graphics/infographics/tax-runaways-tracking-inversions.html
http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2014
http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2014
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Endnotes
1 Jacob J. Lew, “Close The Tax Loophole On Inversions,” The Washington Post, July 27, 2014, https://www.washingtonpost.com/opinions/jacob-lew-close-the-tax-loophole-on-inversions/2014/07/27/2ea50966-141d- 11e4-98ee-daea85133bc9_story.html?utm_term=.244587d75c4e, accessed December 2016.
2 Everett Rosenfeld and Eamon Javers, “Treasury Takes Actions to Combat Tax Inversions,” CNBC.com, September 22, 2014, http://www.cnbc.com/2014/09/22/treasury-takes-actions-to-deter-inversions.html, accessed November 2016.
3 Martin Moylan, “Some Medtronic Shareholders Criticize Irish Merger Proposal,” MPR News, August 21, 2014, https://www.mprnews.org/story/2014/08/21/medtronic, accessed December 2016.
4 Dan Roberts, “Obama Doubles Down On Threat to Act Against Tax Inversions by US Firms,” The Guardian, August 7, 2014, https://www.theguardian.com/world/2014/aug/07/obama-tax-inversion-walgreens-avoid-executive-powers, accessed December 2016.
5 Via Capital IQ, accessed December 2016.
6 Medtronic Market Capitalization, Yahoo Finance, https://finance.yahoo.com/quote/MDT?ltr=1, accessed December 2016.
7 Brad Perriello, “Medtronic Announces $2B Debt Offering,” MassDevice, February 21, 2014, http://www.massdevice.com/medtronic-announces-2b-debt-offering/, accessed December 2016.
8 Patrice Hill, “Corporations Hoard Cash Overseas to Avoid U.S. Taxes, Have Little Reason to Reinvest.” The Washington Time, May 18, 2014, http://www.washingtontimes.com/news/2014/may/18/corporations-hoard-cash-overseas-away-from-high- us/, accessed January 2017.
9 Funding Universe, “Kendall International, History.”
10 Mark Maremont and Jerry Markon, “Tyco’s Kozlowski Is Indicted On Charges of Tax Evasion,” Wall Street Journal, June 5, 2002, http://www.wsj.com/articles/SB1023196847218251120, accessed December 2016.
11 David A. Kaplan, “Tyco’s ‘Piggy,’ Out of Prison and Living Small,” The New York Times, March 1, 2015, http://www.nytimes.com/2015/03/02/business/dealbook/dennis-kozlowskis-path-from-infamy-to-obscurity.html?_r=0, accessed December 2016.
12 David A. Kaplan, “Tyco’s ‘Piggy,’ Out of Prison and Living Small.”
13 Diane Brady, “Ed Breen Sets a New Course for Tyco,” Bloomberg, February 11, 2010, https://www.bloomberg.com/news/articles/2010-02-11/ed-breen-sets-a-new-course-for-tyco, accessed December 2016.
14 Diane Brady, “Ed Breen Sets a New Course for Tyco.”
15 Diane Brady, “Ed Breen Sets a New Course for Tyco.”
16 John Cesto, “Covidien Pulls Up Stakes for an Irish Address, But It’s Actually Still Based Here,” June 18, 2009, http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still- based-here/, accessed December 2016.
17 Covidien, “JP Morgan 29th Annual Healthcare Conference,” Covidien web site, January 11, 2011, http://phx.corporate- ir.net/phoenix.zhtml?c=76126&p=irol-CovidienArchive, accessed December 2016.
18 Jon Chesto, “Covidien Pulls Up Stakes for an Irish Address, but It’s Actually Still Based Here,” June 18, 2009, http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still- based-here/, accessed December 6, 2016.
19 David D. Stewart, “U.S. Firm Moving Tax Residency to Ireland,” Tax Notes International, Volume 53, No. 2, January 12, 2009, http://www.taxanalysts.com/www/freefiles.nsf/Files/tnsample.pdf/$file/tnisample.pdf, accessed December, 2016.
20 Covidien Press Release, “Covidien Elects Jose E. Almeida President and Chief Executive Officer,” March 16, 2011, http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=2004028, accessed December 2016.
21 Connecticut by the Numbers, “CT Companies Among World’s Most Innovative, Forbes List Shows,” September 9, 2013, http://ctbythenumbers.info/2013/09/09/ct-companies-among-worlds-most-innovative-forbes-list-shows/, accessed January 2017.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
https://www.washingtonpost.com/opinions/jacob-lew-close-the-tax-loophole-on-inversions/2014/07/27/2ea50966-141d-11e4-98ee-daea85133bc9_story.html?utm_term=.244587d75c4e
https://www.washingtonpost.com/opinions/jacob-lew-close-the-tax-loophole-on-inversions/2014/07/27/2ea50966-141d-11e4-98ee-daea85133bc9_story.html?utm_term=.244587d75c4e
http://www.cnbc.com/2014/09/22/treasury-takes-actions-to-deter-inversions.html
https://www.theguardian.com/world/2014/aug/07/obama-tax-inversion-walgreens-avoid-executive-powers
https://finance.yahoo.com/quote/MDT?ltr=1
http://www.washingtontimes.com/news/2014/may/18/corporations-hoard-cash-overseas-away-from-high-us/
http://www.washingtontimes.com/news/2014/may/18/corporations-hoard-cash-overseas-away-from-high-us/
http://www.wsj.com/articles/SB1023196847218251120
https://www.bloomberg.com/news/articles/2010-02-11/ed-breen-sets-a-new-course-for-tyco
http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still-based-here/
http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still-based-here/
http://phx.corporate-ir.net/phoenix.zhtml?c=76126&p=irol-CovidienArchive
http://phx.corporate-ir.net/phoenix.zhtml?c=76126&p=irol-CovidienArchive
http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still-based-here/
http://blogs.wickedlocal.com/massmarkets/2009/06/18/covidien-pulls-up-stakes-for-an-irish-address-but-its-actually-still-based-here/
http://www.taxanalysts.com/www/freefiles.nsf/Files/tnsample.pdf/$file/tnisample.pdf
http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=2004028
http://ctbythenumbers.info/2013/09/09/ct-companies-among-worlds-most-innovative-forbes-list-shows/
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22 Damian Garde, “Restructuring Costs Bite Covidien’s Profits in Q2,” FierceBiotech, April 26, 2013, http://www.fiercebiotech.com/medical-devices/restructuring-costs-bite-covidien-s-profits-q2, accessed December 2016.
23 U.S. Food & Drug Administration, “Premarket Approval (PMA),” U.S. Food & Drug Administration web site, http://www.fda.gov/medicaldevices/deviceregulationandguidance/howtomarketyourdevice/premarketsubmissions/prem arketapprovalpma/, accessed December 2016.
24 Medtronic, “Healthcare is Transforming. So We Are,” Medtronic web site, http://www.medtronic.com/us- en/transforming-healthcare/further-together-perspective.html, accessed December 2016.
25 Michelle Fay Cortez and David Welch, “Medtronic to Buy Device Maker Covidien for $42.9 Billion,” Bloomberg, June 16, 2014, https://www.bloomberg.com/news/articles/2014-06-16/medtronic-to-buy-device-maker-covidien-for-42-9-billion, accessed December 2016.
26 Medtronic, “Welcome to Medtronic Ireland,”Medtronic web site, http://www.medtronic.ie/about-medtronic/medtronic-/ index.htm, accessed December 2016.
27 Michael Weinstein et al., “Our Thoughts on the Deal: Raising Rating to OW, Establishing Y/E 2015 PT of $78,” J.P. Morgan, June 16, 2014, via Thompson One, accessed January 2017.
28 Zachary R. Mider, “Medtronic Is Biggest Yet to Renounce U.S. Tax Citizenship,” Bloomberg, June 16, 2014, https://www.bloomberg.com/news/articles/2014-06-16/medtronic-is-biggest-firm-yet-to-renounce-u-s-tax-status, accessed December 2016.
29 Jennifer Bjorhus, “Medtronic Deal Could Sting For Long-Time Shareholders,” Star Tribune, July 6, 2014, http://www.startribune.com/medtronic-deal-could-sting-for-long-time-shareholders/265750841/, accessed December 2016.
30 Dan Mangan, “Capital Pains Tax: Medtronic Inversion Ires Investors,” CNBC, September 22, 2014, http://www.cnbc.com/2014/09/22/capital-pains-tax-medtronic-inversion-ires-investors.html, accessed December 2014.
31 Everett Rosenfeld and Eamon Javers, “Treasury takes actions to combat tax inversions.”
32 Jacob J. Lew, “Close the tax loophole on inversions.”
33 Everett Rosenfeld and Eamon Javers, “Treasury takes actions to combat tax inversions.”
34 Bill George, “A Case for Rejecting Pfizer’s Bid for AstraZeneca,” The New York Times, May 8, 2014, http://dealbook.nytimes.com/2014/05/08/a-case-for-rejecting-pfizers-bid-for-astrazeneca/?_r=0, accessed December 2014.
This document is authorized for use only in KRIS MICHAELSON’s ACT500 – WIC17 at Colorado State University – Global Campus from Dec 2017 to Jun 2018.
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