Medtronic on Friday said yes to the question of whether it would proceed with its $43 billion acquisition of Covidien, now that the federal government has made it harder for the Fridley, MN-based medtech giant to see tax benefits from moving its official headquarters to Ireland through the deal. Medtronic--which had been reportedly looking to draw on its billions in foreign reserves to help pay for the deal interest-free--will instead use approximately $16 billion in external financing to complete the deal. "This proposed acquisition was conceived and undertaken for strategic reasons and is intended to create a company that can treat more patients, in more ways and in more places around the world," Omar Ishrak, chairman and CEO of Medtronic, said in a news release. "We believe our combination will be uniquely positioned to help advance the goals of the Affordable Care Act in the U.S. as well as the objectives of virtually all health systems - to drive access to high-quality, affordable health care for patients around the world." All terms and conditions of the definitive agreement between the two companies, reached in June, remain unchanged. The Medtronic-Covidien deal and others like it have drawn ire from President Barack Obama and other progressive politicians because they involve American companies using mergers with overseas companies to move their headquarters out the country--reducing corporate taxes owed in the process. With legislation to curtail the practice tied up in Congress, Obama moved on his own. The Treasury Department in late September announced that it is cracking down on many of the financial mechanisms--from so-called "hopscotch loans" to stock transaction mechanisms--that inverted companies use to access the overseas earnings of foreign subsidiaries of the U.S. company that inverts without paying U.S. tax. It is exactly such financial mechanisms that Medtronic was expected to utilize after merging with Covidien and moving its official headquarters to Ireland. Obama said at the time that the actions announced by Treasury Secretary Jacob J. Lew are meant to "discourage companies from taking advantage of corporate inversions--moving their tax residence overseas on paper to avoid paying their fair share in taxes here at home."
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