Medtronic 2014 Annual Report Download - page 38

relevant approvals under the antitrust, competition, and foreign investment laws of certain foreign countries under which filings
or approvals are or may be required.
The governmental agencies from which the parties will seek certain of these approvals have broad discretion in administering
the governing regulations. As a condition to their approval of the Pending Acquisition, agencies may impose requirements,
limitations or costs or require divestitures or place restrictions on the conduct of New Medtronic’s businesses after the closing.
These requirements, limitations, costs, divestitures or restrictions could jeopardize or delay the consummation of the transaction
or may reduce the anticipated benefits of the transaction. Further, no assurance can be given that the required shareholder
approvals will be obtained or that the required closing conditions will be satisfied, and, if all required consents and approvals are
obtained and the closing conditions are satisfied, no assurance can be given as to the terms, conditions, and timing of the
approvals. Pursuant to the transaction agreement, Medtronic would generally be required to commit to make, and make, any
divestitures needed to obtain any antitrust or competition-related regulatory approvals so long as the divestitures would not
result in a material adverse effect on the combined company, taken as a whole. If Medtronic and Covidien agree to any material
requirements, limitations, costs, divestitures or restrictions in order to obtain any approvals required to consummate the Pending
Acquisition, these requirements, limitations, costs, divestitures or restrictions could adversely affect New Medtronic’s ability to
integrate Medtronic’s operations with Covidien’s operations or reduce the anticipated benefits of the transaction. This could
result in a failure to consummate the Pending Acquisition or have a material adverse effect on New Medtronic’s business and
results of operations.
Future potential changes to the tax laws under which New Medtronic is expected to be treated as a foreign corporation for
U.S. federal tax purposes may jeopardize or delay the consummation of the Pending Acquisition, and any such changes or
changes in other tax laws relating to multinational corporations, whether enacted before or after consummation, may
materially adversely affect New Medtronic.
Under current law, New Medtronic is expected to be treated as a foreign corporation for U.S. federal tax purposes. Changes to
Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (“Section 7874”), or the U.S. Treasury regulations
promulgated thereunder could affect New Medtronic’s status as a foreign corporation for U.S. federal tax purposes. Any such
changes could have prospective or retroactive application, and may apply even if enacted after the Pending Acquisition is
consummated. If New Medtronic were to be treated as a U.S. corporation for federal tax purposes, it could be subject to
substantially greater U.S. tax liability than currently contemplated as a foreign corporation. In addition, recent legislative
proposals have aimed to limit the ability of foreign-owned corporations to deduct interest expense, and to make other changes in
the taxation of multinational corporations. Any of these changes to such laws or regulations could materially adversely affect
New Medtronic.
Each of Medtronic’s and Covidien’s respective obligations to consummate the Pending Acquisition is subject to a condition that
there shall have been no change in applicable law (whether or not such change in law is yet effective) with respect to
Section 7874 (or any other U.S. tax law), or certain official interpretations thereof, and there having been no bill that would
implement such a change which has been passed in identical (or substantially identical such that a conference committee is not
required prior to submission of such legislation for the President’s approval or veto) form by both Houses of Congress and for
which the time period for the President of the United States to sign or veto such bill has not yet elapsed, in each case, that, once
effective, in the opinion of nationally recognized U.S. tax counsel, would cause New Medtronic to be treated as a United States
domestic corporation for United States federal income tax purposes.
Failure to consummate the Pending Acquisition could have a materially adverse effect on our financial condition and results
and could negatively impact our stock price.
We will incur significant transaction costs relating to the Pending Acquisition, including legal, accounting, financial advisory,
regulatory, and other expenses. In general, these expenses are payable by us whether or not the merger is completed. In addition,
if the transaction agreement is terminated under specified circumstances, we may be required to pay to Covidien a termination
fee equal to $850 million. The payment of any of these costs could have an adverse effect on our financial condition, results of
operations or cash flows. The current market price of our stock may reflect an assumption that the pending merger will occur
and failure to complete the merger could result in a decline in our stock price.
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