Minnesota-based medical-device maker Medtronic is in "advanced" talks to acquire one of its chief rivals, Covidien, for $40 billion, according to reports Saturday from The Wall Street Journal, Bloomberg news service, and others.
The reports said the companies may announce a merger as soon as Monday, citing unnamed sources who had been briefed on the negotiations.
One of the main results of the deal would be to lower Medtronic's corporate tax rate, which is now 35 percent, according to the Wall Street Journal. Covidien is headquartered in Dublin, Ireland, where the chief corporate tax rate is 12.5 percent.
Covidien’s U.S. headquarters are in Massachusetts, but it has a significant presence in Minnesota after a recent series of acquisitions, according to the Business Journal. Covidien has about 1,000 employees in Minnesota.
Medtronic's current market value is $60.8 billion, while Covidien is valued at $32.5 billion, USA Today reports.
There's a trend toward companies merging for such tax advantages, called "tax inversions," according to the Wall Street Journal. Many health care-related companies are trying to cut costs since the health care reform law went into effect earlier this year. The law puts limits on what those companies can charge for their products and services, says USA Today.
Medtronic has more than $20.5 billion in offshore holdings, according to the Business Journal, and moving its headquarters outside the U.S. would make that cash cheaper to access.
Because of Ireland's low tax rates, several med-tech companies have significant operations in the country.
Officials at both companies declined to comment on the merger talks, according to Bloomberg.
Medtronic makes a wide range of medical devices such as heart valves and pacemakers. Covidien makes home and hospital health-care products and surgical supplies.