Covidien Investor Sues to Block Planned Sale to Medtronic

Covidien Plc, the Irish maker of surgical accessories and operating-room products, was sued by a shareholder over claims the company’s planned sale to U.S. competitor Medtronic Inc. will enrich directors and managers by almost $96 million in cash at the expense of investors.

In June, Medtronic agreed to buy Dublin-based Covidien for $42.9 billion in cash and stock to expand its portfolio of products sold to hospitals. As part of the deal, Medtronic, the world’s biggest maker of heart-rhythm devices, would move its legal address, though not its executive offices, to Ireland and lower its U.S. tax bills.

Covidien blocked competing bids that could have raised the value of a sale and withheld from shareholders information needed to make an informed vote on the deal, the Rosenfeld Family Foundation said in a proposed group lawsuit, or class action, filed today in Boston federal court.

“The proposed transaction is the result of a flawed single-bidder sale process controlled and orchestrated by the company’s conflicted board and management,” the foundation, which seeks to represent other disgruntled shareholders in the case, said in its complaint.

Peter Lucht, a spokesman for Covidien, declined to comment in the lawsuit, citing company policy on pending litigation.

The agreement to buy Covidien was among several health-care industry deals that have set off controversy in the U.S., with congressional leaders and President Barack Obama’s administration looking for ways to keep companies from moving.

Medtronic, based in Minneapolis, isn’t named in the lawsuit.

The case is Rosenfeld Family Foundation v. Covidien Plc, 14-cv-13490, U.S. District Court, District of Massachusetts (Boston).

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