It’s no secret that Medtronic (NYSE:MDT) stands to save a bundle on corporate taxes by shifting its headquarters to Ireland in the $43 billion acquisition of Covidien (NYSE:COV), but not all of the company’s stakeholders will be so fortunate.
Medtronic stands to save between $3.5 billion to $4.2 billion in U.S. taxes, according to a Star Tribune estimate, while shareholders will face a fee when they trade in Medtronic stock for shares in the new company.
Company insiders are insulated from part of the shareholder tax thanks to a provision in the acquisition agreement that ensures Medtronic will pay their share, but non-protected shareholders, including many employees, could face thousands in taxes depending on their holdings and their tax brackets, according to the report.
Medtronic leadership addressed concerns about the capital gains tax that will fall to shareholders in an internal memo circulated earlier this week, saying that the company plans to release "comprehensive information for employees to ensure they receive accurate details about any tax implications."
"One common question we’ve received from employees is, ‘What are the capital gains tax implications for Medtronic shareholders as a result of this transaction?’" Medtronic chief human resources officer Carol Surface wrote. "We have mentioned in internal and external communications that Medtronic shareholders may have to pay capital gains taxes as a result of this transaction. However, there is no one simple answer because taxes vary based on many different individual parameters."
The company further promised to maintain an online portal to address commonly asked questions and keep employees apprise of developments as Medtronic and Covidien work on sealing the deal.