Medtronic, unfortunately, is now stuck with a nearly $221 million tax dispute with the Internal Revenue Service as a result of buying Covidien last year. It has now agreed to settle, according to a regulatory filing.
Back in 2013, Covidien’s corporate predecessors, Tyco International and TE Connectivity, were told by the IRS that they owed $914 million to the U.S. Treasury – plus another $154 million in penalties – based on illegitimate deductions that were reported.
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So now, this debt must be split up, and Medtronic is getting the majority of the blow.
The total amount was reportedly negotiated down to between $475 million and $525 million. Medtronic owes 42 percent of that – somewhere between $199.5 million and $220.5 million. Tyco will take on 27 percent of the debt ($128.3 million to $141.8 million) and TE Connectivity is responsible for 31 percent $147.3 million to $162.8.
Although this payment doesn’t really put a dent in Medtronic’s finances overall, it’s perhaps a reminder to be clear on all accounts of what a company is buying into with M&A transactions.
According to the filing, the Tax Sharing Participants expect payment to be made to the IRS and among the parties within the next six months.
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