Medtronic Taps Former Senators To Lobby Against Anti-Inversion Bill

Amid growing government and public sentiment against tax inversion deals, medical device giant Medtronic Inc. recently hired former legislators to lobby against pending measures to curb those deals and save its proposed merger with Covidien PLC in the process.

According to a lobbying registration filing dated June 1, 2014, Medtronic hired a five-person team of lobbyists from the Breaux Lott Leadership Group including former U.S. Senators John Breaux (D-LA) and Trent Lott (R-MS) to lobby against the “Stop Corporate Inversions Act of 2014” bill filed by Sen. Carl Levin (D-MI), according to a report from the Citizens for Responsibility and Ethics in Washington (CREW). CREW also cited another report disclosing that the group of lobbyists received $200,000 for its lobbying work for Medtronic during the second quarter of the year. 

Under the proposed deal announced in June, Medtronic will pay $42.9 billion to acquire Covidien and move its tax domicile to Ireland where Covidien is based — while maintaining its operational headquarters in Minnesota. In a Reuters report, company executives said that the deal would pump $10 billion back to the U.S. technology sector over the next ten years, but government officials say that Medtronic is merely exploiting a tax loophole to avoid paying U.S. taxes.

The “Stop Corporate Inversions Act,” one of a handful of measures in Congress designed to stop inversions, aims to raise the requirement of stock ownership of American companies wanting to invert from 20 percent to 50 percent and impose a two-year moratorium on inversions. If passed, the measure would effectively kill the proposed merger between Medtronic and Covidien.

According to the New York Times, Medtronic is fending off the bill and similar legislation in Congress meant to stymie the mega deal because the company’s standing offer document to Covidien essentially states that, “as a condition to completion of the deal, Medtronic has to get its tax inversion and become a foreign corporation for tax purposes.” The Times also noted that “Medtronic certainly has more than 25 percent of its employees, sales and assets in the United States,” meaning that it will definitely qualify as an American firm barred from completing an inversion under the terms of the “Stop Corporate Inversions Act.”

Medtronic would also be forced to pay Covidien an $850 million breakup fee as an exit clause if the deal falls through, although the penalty does not apply if the agreement is discontinued because of tax code changes, according to merger documents cited by the Wall Street Journal.