Minneapolis-based medical-device maker Medtronic is locked in advanced talks to merge with its chief rival Covidien, according to several published reports Saturday.
Bloomberg news service and an article on The Wall Street Journal's website said a merger that could be worth more than $40 billion may be announced as early as Monday, citing unnamed sources who had been briefed on the negotiations.
The deal could effectively lower Medtronic's 35% corporate tax rate, according to the Journal article. Covidien is headquartered in Dublin, Ireland, where the chief corporate tax rate is 12.5%.
Medtronic's current market value is $60.8 billion, while Covidien is valued at $32.5 billion. Shares of both companies closed slightly lower Friday in a market that mostly rebounded after a string of down days tied to a possible civil war in Iraq.
Companies merging for tax advantages, dubbed "tax inversions," have become more popular in recent years, and some companies are rushing to complete deals before regulators outlaw them. According to the Journal, many health care-related companies have been seeking to lower costs since the new Affordable Care Act, which went to into effect earlier this year, limits what they can charge for products and services.
Just this month, New York-based Pfizer made a failed takeover bid for British-based AstraZeneca. The $120 billion deal was aimed in part at lowering the U.S. drug company's corporate tax rate.