Medtronic-Covidien merger to create world’s biggest medical device maker
American medical device manufacturer Medtronic on Sunday announced that the management has agreed to acquire rival firm Covidien in a cash-&-stock deal worth $42.9 billion to create the world's biggest medical device maker.
The terms of the deal state that Medtronic will pay $35.19 in cash plus 0.956 of a share for each share owned by Covidien's current shareholders. The value of the deal represents a premium of 29 per cent to Covidien's market share price at Friday's close. Covidien shareholders will own nearly 30 per cent of the combined entity.
Medtronic also announced its decision to relocate its headquarters from Minneapolis to Covidien's executive base in Ireland. The move will help the American firm bring its tax burden lower as tax rates in Ireland are significantly lower than those in the United States.
Omar Ishrak, chairman and chief executive officer of Medtronic, claimed that the deal was not signed with an intention to cut tax rates. He claimed that tax rate would remain almost the same, at around 18 per cent.
Speaking about the deal, Ishrak added, "The difference is that through this combination, Medtronic can get access to the free cash flow that Covidien generates and deploy it in the U. S. There are larger technology acquisitions, innovations and R&D that we have not been able to do."
Ishrak also announced that Medtronic would invest $10 billion in technology, including for research & development and acquisitions, in the United States over the next decade.
The planned merger of the two companies will create an entity that will be the world's biggest provider of medical devices, with a workforce of 87,000 employees in more than 150 countries.
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