December 29, 2014 by Brad Perriello
A Minnesota federal judge declines to stop Medtronic’s plan to cover a $63 million tax tab stemming from its Covidien buyout for its top executives and directors.
A federal judge in Minnesota last week declined to bar aMedtronic (NYSE:MDT) plan to cover more than $63 million in taxes its $43 billion buyout of Covidien (NYSE:COV) would incur for its top executives and directors.
U.S. tax laws impose a 15% excise tax on stock owned by executives and directors for the 6 months before and after a merger transaction. Although it’s said all along that it will offer an excise tax “gross-up” to cover executives from the tax, Medtronic revealed in an August 26 regulatory filing the details of the coverage.
Marilyn Clark filed a shareholders derivatives lawsuit Oct. 3 in the U.S. District Court for Minnesota over the “wrongful decision to force the company to indemnify and reimburse Medtronic’s officers and directors for millions of dollars of their personal tax liability in connection with an ‘inversion’ merger that Medtronic entered into with an overseas entity, Covidien plc,” according to court documents. “The multi-million dollar windfall tax reimbursement is wholly self-serving, counter to public policy, and harmful to Medtronic its shareholders,” Clark alleged.