Medtronic to Share Tax Inversion Benefit in $5 Billion Buyback

  • Company said reorganization after deal saved $9.3 billion
  • Majority of rest of savings will go to pay down debt

Medtronic Plc will give shareholders more than half the medical device maker’s $9.3 billion in savings that resulted from its recent tax inversion to Ireland, Chief Executive Officer Omar Ishrak said Monday.

The new $5 billion share repurchase program comes after the company bought Covidien Plc in January. Medtronic used the deal to move its tax address abroad, though not its Minneapolis, Minnesota, operating headquarters. The move, and a related internal reorganization in September, gave the company access to $9.3 billion after taxes that was previously held by Medtronic subsidiaries in foreign countries.

Medtronic has a policy of returning at least 50 percent of its free cash flow each year to shareholders by way of dividends and share repurchases. The repurchases will take place before the end of the 2018 fiscal year, with an emphasis on acting sooner, the company said in a statement released during the J.P. Morgan Health Care Conference in San Francisco.

The majority of the remaining cash will go to pay down debt, Ishrak said. The company’s fiscal year ends in April.

The company also raised the low end of its fiscal year 2016 earnings projections, after U.S. lawmakers permanently enacted a tax credit for research and development activities. The company said earnings, excluding one-time items, will be $4.36 to $4.40 a share, including 45 cents to 50 cents of negative currency impact. On Dec. 3, it had projected adjusted earnings of $4.33 to $4.40 a share.

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