Medtronic buying Ireland-based Covidien
- U.S.-based Medtronic will acquire Ireland-based Covidien for a total of $42.9 billion, including cash and stock.
- Based on this buyout, Medtronic will become one of the largest medical device companies in the world.
- In addition to the natural synergies between the two companies, there is a tax benefit. Ireland has a 12.5% corporate tax rate.
The merging of these companies represents a great deal of synergy -- combining Medtronic’s pacemakers and spinal treatments, with Covidien’s surgical equipment. Once the acquisition is complete, Medtronic’s gross revenues will be in the $27 billion range, including $3.7 billion from emerging markets, and the company will have 87,000 employees in 150 countries.
This deal is structured as an inversion -- a situation in which the acquiring company relocates its business to the home country of the company it is acquiring, often with the goal of decreasing its corporate tax burden.
Although the corporate tax rate in Ireland is 12.5%, Medtronic maintains that its tax rate will be roughly 18% -- still substantially less than in the U.S. Nonetheless, the company maintains that its decision is not driven by a desire for lower taxes and that it will continue to have a presence in the States. Medtronic plans to invest $10 billion over the next 10 years in acquisitions, R&D and technology in the U.S.