Covidien plans to incorporate in Ireland, exit Bermuda

Mansfield firm says move will help growth

Covidien Ltd., which is operated out of Mansfield but formally chartered in Bermuda, said yesterday its board voted to move its incorporation to Ireland next year.

The medical-device maker said the move would make it easier to do business as it expands abroad, since Ireland is a member of the European Union. In addition, the company said, Ireland has many treaties with other countries that Bermuda lacks.

"The decision to move to Ireland was made after an extensive analysis of several possible alternatives," said chief executive Richard J. Meelia. The move must still be approved by shareholders and the Bermuda Supreme Court.

In contrast to Bermuda, where Covidien has just five employees, Covidien already has five factories and nearly 2,000 employees in Ireland. As part of the move, the company said it plans to add finance and regulatory staffers in Ireland and hold most of its board meetings there. It also set up an Irish holding company, Covidien plc.

Still, Covidien plans to keep Mansfield as its primary base. That's where Meelia and many senior executives are based. Covidien has about 2,000 employees in Massachusetts and 42,000 worldwide.

Earlier this year, Meelia said the company decided to remain incorporated in Bermuda when it was spun out of Tyco International Ltd. last year primarily for tax reasons. Like Bermuda, Ireland is known for its low corporate tax rates, and Covidien said it does not expect its taxes to significantly change.

Meelia also noted that Tyco shareholders had rejected a proposal to move its incorporation back to the United States in 2003 and other Tyco spinoffs also decided to remain in Bermuda. Since then, Tyco's board voted to move its incorporation from Bermuda to Switzerland. Another Tyco spinoff, Tyco Electronics Corp., remains based in Bermuda.

Nevertheless, Covidien warned investors last month that it was the target of "continued negative publicity" over the use of offshore jurisdictions.

"This negative publicity could harm our reputation and impair our ability to generate new business if companies or governmental agencies decline to do business with us as a result of any perceived negative public image of Bermuda companies or the possibility of our customers receiving negative media attention from doing business with a Bermuda company," Covidien said in a government filing.

In addition, there have been periodic efforts by Congress and some states to restrict government contracts to US companies that shifted their headquarters to tax havens, such as Bermuda or the Bahamas. In 2004, for instance, the California Department of General Services ruled that state agencies were barred from contracting with Tyco and several Tyco affiliates.

Regardless, Covidien has continued to win millions of dollars in federal contracts, despite having its nominal headquarters in Bermuda. And Covidien spokesman Eric Kraus said yesterday the negative publicity was not "the driving force in our decision to move to Ireland."

Covidien manufactures a wide range of health products - including syringes and surgical tools - as well as ingredients used to make pharmaceuticals.

Todd Wallack can be reached at twallack@globe.com.