Medtronic shareholders given green light to pursue suit against Medtronic's Covidien deal

Laura Dyrda -  

Medtronic acquired Covidien for around $49.9 billion in 2015 and the combined company became Medtronic plc. However, some stockholders took issue with the transaction.

A group of shareholders have been contesting the tax inversion strategy for the past three years, and now the Minnesota Supreme Court ruled the lawsuit could proceed, according to the Star Tribune.


Here are five things to know:


1. When Medtronic acquired Covidien, the company moved corporate headquarters from Minneapolis to Dublin, Ireland, where Covidien was based. The plaintiffs alleged they paid millions in capital gains taxes and the transaction diluted their share value because the corporate tax rate decreased after the company moving to Ireland. At the same time, the company benefitted from moving overseas.


2. Under the terms of the agreement, shares of Covidien outstanding stock were converted into the right to receive $35.19 in cash and 0.956 in ordinary Medtronic plc shares; Medtronic common stock was converted into the right to receive one ordinary share of Medtronic plc.


3. The class-action lawsuit alleges Medtronic harmed investors in the deal and the investors seek financial damages.


4. Minnesota Court of Appeals ruled the shareholders had "solid legal footing" to proceed with the suit in January 2016 after a lower court dismissed the case. Now, a higher court agrees.


5. Medtronic plans to defend the move and a spokesperson said the company believes "substantive claims are without merit."


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