Boston, MA 06/16/2014 (wallstreetpr) – A Reuters report reveals that Medtronic, Inc. (NYSE:MDT) has agreed to buy its rival Covidien Plc in a $42.9 billion deal and with that, the U.S. largest medical device maker is all ready to move its executive headquarters to Ireland, where Covidien has its office. The deal adds to the other recent buyouts as the U.S. firms are increasing opting acquisitions as their route to cut down their tax bills.
Strategic Than Tax Based
The deal is settled on a cash and stock basis, where each share of Covidien is priced at $93.22 and would be settled $35.19 in cash coupled with 0.956 shares of Medtronic, Inc. (NYSE:MDT). While Medtronic stresses on the idea of Covidien’s efficient medical technology as its reason to buy the Dublin based company, the relief on the tax front could not go unnoticed. During an interview, Medtronic’s Chief Executive, Omar Ishrak said that the real purpose of the deal is strategic, both in view of long term as well as intermediate term. Ishrak adds that the investment would prove good for the U.S. and stated that the current corporate tax rate of nearly 18% would remain unchanged for the company. According to Jefferies analyst, Raj Denhoy, the merger could trim down Medtronic, Inc. (NYSE:MDT)’s bill by 2 to 3%, citing Covedien’s current tax rate of 16%.
Expansion Beyond Scope
Medtronic, Inc. (NYSE:MDT) is the largest company manufacturing stand-alone devices across the globe and thus, its marriage with Covidien, which specializes in surgical devices could wage a tough competition for the industry leaders like Johnson & Johnson Co. Moreover, the acquisition will take Medtronic a level above from its current range of heart devices, insulin pumps, spinal implants and other products. At the same time, the unison of the two companies will allow to better establish in the hospitals, particularly those in the United States as the latest healthcare reform has been a point of pressure for the company’s device pricing.
