A lawsuit filed by Medtronic shareholders was revived in a Minnesota appeals court yesterday concerning the merger with Covidien – the biggest medical device acquisition ever, closing at $50 billion.
The acquisition was announced during the summer of 2014, and soon after, shareholder Lewis Merenstein sued in Hennepin County District Court. He claimed that the conversion of Medtronic stock to the combined company would lead to a substantial loss for Medtronic shareholders.
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As MassDevice reported, the deal saw Medtronic pay $93.22 per share for Covidien, with Covidien share converted to the right for $35.19 in cash and 0.956 Medtronic shares, leaving Covidien stockholders with about a 30% stake in Medtronic.
“Medtronic stockholders will be forced to pay taxes on any gains in Medtronic stock,” according to Merenstein’s complaint. “But because the sale does not generate cash proceeds that would allow stockholders to pay the taxes, Medtronic stockholders who have held the stock for over a year could see federal tax rates of 15% to 30% on the gain.”
A 3-judge panel of the Minnesota Appeals Court ruled yesterday that the lower court should not have tossed 11 of the 12 claims in the Merenstein lawsuit. Medtronic plans to appeal the decision to the Minnesota Supreme Court.
Photo: Flickr user Brian Turner
