The process is reportedly in an early stage, but the Fridley, Minn.-based company has been looking for prospective buyers for the division, which could be worth $5 billion.
The sale could happen in a single deal or through the divestiture of smaller chunks of the business, which sells general medical equipment including monitoring equipment, medical instrumentation, needles and other basic supplies.
A Medtronic spokesman declined to comment, citing the company’s policy on rumors of potential M&A or divestiture plans.
The medical supplies business reported earnings before interest, taxes, depreciation and amortization of approximately $500 million, according to Bloomberg, with the deal slated to snag in the range of 8 to 10 times that number.
Medtronic shares had a positive day yesterday, up 1.8% to close at $76.02. MDT shares have stayed steady today, down less than 1% and trading at $75.52 as of 11:43 a.m. EST.
Earlier this month, the U.S. Internal Revenue Service reportedly agreed to drastically slash the amount it claims Medtronic (NYSE:MDT) owes on loans between its subsidiaries, from a potential $1.36 billion to just $14 million.
Last summer, a federal tax judge found for the company in its lawsuit against the IRS over the dispute, which involves “transfer pricing” among the company’s various units during the tax years 2005 and 2006. The tax bureau claimed Medtronic owed income tax of $548.2 million for 2005 and $810.3 million for 2006; the company disputed the bill and took the case to the U.S. Tax Court. Judge Kathleen Kerrigan found in June that Medtronic proved that the IRS was “arbitrary, capricious, or unreasonable” in its interpretation of the transfer pricing for its Puerto Rico subsidiary.
In transfer pricing, income is allocated among branches in different countries. It’s a legal tax maneuver companies can use to attribute profits from a product made and sold in the U.S. to a unit in a foreign country. If Kerrigan’s ruling had gone the other way, the IRS could have dunned Medtronic for extra taxes from 2007 on. Medtronic has said it expects to repatriate between $500 million and $4.5 billion in overseas cash once the dispute is put to bed.
This month the revenuers agreed to use a much smaller figure, $38.9 million, to calculate what Medtronic owes on transfer pricing for 2005 and 2006 combined. That means a tax tab of just $14 million, according to Law360.com.