CTC Member Covidien to be Purchased by Minnesota’s Medtronic

This coverage comes from Susan Kelly and Greg Roumeliotis at Reuters:

(Reuters) – U.S. medical device maker Medtronic Inc said on Sunday it had agreed to buy Covidien Plc for $42.9 billion in cash and stock and move its executive base to Ireland in the latest transaction aiming for lower corporate tax rates abroad.

While the deal will allow Medtronic to reduce its overall global tax burden, the Minneapolis-based company said it was driven by a complementary strategy with Covidien on medical technology rather than tax considerations.

“The real purpose of this, in the end, is strategic, both in the intermediate term and the long term,” Medtronic Chief Executive Omar Ishrak said in an interview after the deal was announced. “It is good for the U.S. in that we will make more investment in U.S. technologies, which previously we could not.”

Medtronic’s corporate tax rate, now at around 18 percent, won’t change much, Ishrak said.

The merger of Medtronic, the world’s largest stand-alone medical device maker, and Covidien, a maker of devices used in a range of surgical procedures, will create a close competitor in size to the medical device business of industry leader Johnson & Johnson Co .

The deal values each Covidien share at $93.22, paid for by $35.19 in cash and 0.956 Medtronic shares. The transaction represents a 29 percent premium to Covidien’s closing stock price on Friday, Medtronic said.

The combination, which will leave Covidien shareholders owning about 30 percent of the combined company, is expected to result in at least $850 million of annual pre-tax cost synergies by the end of fiscal year 2018. Medtronic said it would keep its operational headquarters in Minneapolis and pledged $10 billion in U.S. technology investments over the next 10 years.

To read the complete coverage at the Hartford Courant, click here.

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